Bankwell Financial Group, Inc. (NASDAQ:BWFG) reported record GAAP net income of $6.9 million, or $0.87 per share, for the third quarter of 2021, versus $3.0 million, or $0.38 per share, for the same period in 2020.

The Company's Board of Directors declared an $0.18 per share cash dividend, payable November 22, 2021 to shareholders of record on November 12, 2021.

We recommend reading this earnings release in conjunction with the Third Quarter 2021 Investor Presentation, located at http://investor.mybankwell.com/Presentations and included as an exhibit to our October 27, 2021 Current Report on Form 8-K.

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

"On behalf of all of my colleagues at Bankwell, I am proud to announce our results for the most recent quarter. The Company achieved record levels in most performance categories of our business. Loan originations for the quarter totaled $200 million, with net loan growth of $92 million, excluding Paycheck Protection Program ("PPP") loans. Year to date, gross loan balances excluding PPP loans have grown by $232 million for an annualized growth rate of 19%. The Company's ROAE and ROAA were 14.09% and 1.22%, respectively, for the quarter. Loan demand remains brisk; our healthy pipeline positions us for a strong finish to the year and lays the foundation for increased profitability in 2022.

"Confident in the strength of our balance sheet and the prospect of growing earnings, the Company's Board of Directors today authorized the repurchase of an additional 200,000 shares of its common stock."

Third Quarter 2021 Highlights:

Return on average assets was 1.22% and return on average equity was 14.09% for the quarter ended September 30, 2021.
The net interest margin improved to 3.39% for the quarter ended September 30, 2021.
The efficiency ratio improved to 54.1% for the quarter ended September 30, 2021.
Excluding Paycheck Protection Program ("PPP") loans, total gross loans were $1.8 billion, growing $232.1 million, or 14.6%, compared to December 31, 2020. On a quarterly basis loans grew $92.3 million, or 5.3% compared to June 30, 2021.
Gains from loan sales totaled $0.9 million and $2.3 million for the quarter and nine months ended September 30, 2021, respectively, compared to $27 thousand for the quarter and nine months ended September 30, 2020.
Total deposits were $1.9 billion compared to $1.8 billion at December 31, 2020.
Noninterest bearing deposits increased by $68.5 million, or 25.3% compared to December 31, 2020.
The percentage of noninterest bearing deposits to total deposits increased to 18.0% compared to 14.8% at December 31, 2020.
The cost of interest bearing deposits decreased approximately 47 basis points to 0.60% for the quarter ended September 30, 2021 when compared to the quarter ended September 30, 2020.
Investment securities totaled $105.9 million and represent 4.8% of total assets.
Tangible book value per share rose to $25.25 compared to $22.43 at December 31, 2020.
Shares issued and outstanding were 7,842,824, reflecting repurchases of 52,277 shares of common stock at a weighted average price of $27.26 during the quarter ended September 30, 2021.

Post Third Quarter 2021 Highlights:

Subsequent to September 30, 2021, the Company issued a 3.25% fixed-to-floating rate subordinated note due 2031 in the principal amount of $35.0 million. The proceeds will be used for repayment of $15.5 million of existing subordinated notes and general corporate purposes.
The Company's Board of Directors authorized an additional 200,000 shares for its existing share repurchase program.

Earnings and Performance

Revenues (net interest income plus noninterest income) for the quarter ended September 30, 2021 were $19.2 million, versus $14.2 million for the quarter ended September 30, 2020. Revenues for the nine months ended September 30, 2021 were $53.8 million, versus $42.8 million for the nine months ended September 30, 2020. The increase was primarily attributable to lower interest expense on deposits, an increase in interest and fees on loans due to loan growth and from the resumption of loan sales. Revenues for the nine months ended September 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 September 30, 2021 was $6.9 million, versus $3.0 million for the quarter ended September 30, 2020. Net income for the nine months ended September 30, 2021 was $18.8 million, versus $5.6 million for the nine months ended September 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 lower loan loss reserves in 2021 when compared to 2020, which saw a large increase in reserves due to the COVID-19 Pandemic.

Basic and diluted earnings per share were $0.88 and $0.87, respectively, for the quarter ended September 30, 2021 compared to basic and diluted earnings per share of $0.38 each for the quarter ended September 30, 2020. Basic and diluted earnings per share were $2.38 and $2.37, respectively, for the nine months ended September 30, 2021 compared to basic and diluted earnings per share of $0.71 each for the nine months ended September 30, 2020.

The net interest margin (fully taxable equivalent basis) for the quarters ended September 30, 2021 and September 30, 2020 was 3.39% and 2.67%, respectively. The net interest margin (fully taxable equivalent basis) for the nine months ended September 30, 2021 and September 30, 2020 was 3.08% and 2.81%, 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. In addition, the increase in the net interest margin for the quarter ended September 30, 2021 was positively impacted by a reduction in excess liquidity when compared to the quarter ended September 30, 2020.

Financial Condition

Assets totaled $2.23 billion at September 30, 2021, compared to assets of $2.25 billion at December 31, 2020. The change in assets remained relatively flat as the decrease in excess liquidity was offset by an increase in loans. Gross loans totaled $1.8 billion at September 30, 2021, an increase of $198.9 million compared to December 31, 2020. Excluding PPP loans, gross loans increased by $232.1 million at September 30, 2021 when compared to December 31, 2020. Deposits totaled $1.9 billion at September 30, 2021, compared to deposits of $1.8 billion at December 31, 2020.

Capital

Shareholders' equity totaled $196.2 million as of September 30, 2021, an increase of $19.6 million compared to December 31, 2020, primarily a result of (i) net income of $18.8 million for the nine months ended September 30, 2021 and (ii) a $6.2 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 $3.6 million and common stock repurchases of $3.2 million.

About Bankwell Financial Group

Bankwell is a commercial bank that serves the banking needs of residents and businesses throughout Fairfield and New Haven Counties, Connecticut. For more information about this press release, interested parties may contact Christopher R. Gruseke, President and Chief Executive Officer or Penko Ivanov, Executive Vice President and Chief Financial Officer of Bankwell Financial Group at (203) 652-0166.

For more information, visit www.mybankwell.com.

This press release may contain certain forward-looking statements about the Company. Forward-looking statements include statements regarding anticipated future events and can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as "believe," "expect," "anticipate," "estimate," and "intend" or future or conditional verbs such as "will," "would," "should," "could," or "may." Forward-looking statements, by their nature, are subject to risks and uncertainties. Certain factors that could cause actual results to differ materially from expected results include, but are not limited to, increased competitive pressures, changes in the interest rate environment, general economic conditions or conditions within the securities markets, uncertain impacts of, or additional changes in, monetary, fiscal or tax policy to address the impact of COVID-19, 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, tangible book value per share, and return on average tangible common equity are useful to evaluate the relative strength of the Company's performance and capital position. We utilize these measures for internal planning and forecasting purposes. These non-GAAP financial measures should not be considered a substitute for GAAP basis measures and results, and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure.

BANKWELL FINANCIAL GROUP, INC. CONSOLIDATED BALANCE SHEETS (unaudited) (Dollars in thousands)

	September 30, 2021		June 30, 2021		March 31, 2021		December 31, 2020		September 30, 2020
ASSETS
Cash and due from banks	$	169,417	$	297,851	$	351,194	$	405,340	$	333,103
Federal funds sold	8,097		4,036		10,811		4,258		6,380
Cash and cash equivalents	177,514		301,887		362,005		409,598		339,483

Investment securities
Marketable equity securities, at fair value	2,185		2,192		2,178		2,207		2,203
Available for sale investment securities, at fair value	87,565		90,983		83,218		88,605		90,563
Held to maturity investment securities, at amortized cost	16,107		16,166		16,225		16,078		16,138
Total investment securities	105,857		109,341		101,621		106,890		108,904
Loans receivable (net of allowance for loan losses of $16,803, $16,672, $20,545, $21,009, and $20,372 at September 30, 2021, June 30, 2021, March 31, 2021, December 31, 2020, and September 30, 2020, respectively)	1,805,217		1,719,274		1,650,127		1,601,672		1,600,776
Accrued interest receivable	6,911		6,661		7,306		6,579		7,294
Federal Home Loan Bank stock, at cost	3,632		3,844		6,446		7,860		7,860
Premises and equipment, net	35,118		33,916		33,386		21,762		26,616
Bank-owned life insurance	48,903		48,632		42,881		42,651		42,409
Goodwill	2,589		2,589		2,589		2,589		2,589
Other intangible assets	48		58		67		76		160
Deferred income taxes, net	7,718		8,208		8,908		11,300		11,149
Other assets	33,181		35,415		29,131		42,770		45,782
Total assets	$	2,226,688	$	2,269,825	$	2,244,467	$	2,253,747	$	2,193,022

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Noninterest bearing deposits	$	338,705	$	328,473	$	280,947	$	270,235	$	234,848
Interest bearing deposits	1,544,118		1,610,829		1,578,861		1,557,081		1,532,680
Total deposits	1,882,823		1,939,302		1,859,808		1,827,316		1,767,528

Advances from the Federal Home Loan Bank	80,000		75,000		125,000		175,000		175,000
Subordinated debentures	15,374		15,366		25,271		25,258		25,245
Accrued expenses and other liabilities	52,314		49,362		46,445		49,571		50,982
Total liabilities	2,030,511		2,079,030		2,056,524		2,077,145		2,018,755

Shareholders' equity
Common stock, no par value	119,588		120,451		120,398		121,338		120,854
Retained earnings	85,992		80,543		75,418		70,839		71,603
Accumulated other comprehensive loss	(9,403)		(10,199)		(7,873)		(15,575)		(18,190)
Total shareholders' equity	196,177		190,795		187,943		176,602		174,267

Total liabilities and shareholders' equity	$	2,226,688	$	2,269,825	$	2,244,467	$	2,253,747	$	2,193,022

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, 2021		June 30, 2021		March 31, 2021		December 31, 2020		September 30, 2020		September 30, 2021		September 30, 2020
Interest and dividend income
Interest and fees on loans	$	19,795	$	19,266	$	17,900	$	18,194	$	18,027	$	56,961	$	55,471
Interest and dividends on securities	731		736		769		835		799		2,236		2,402
Interest on cash and cash equivalents	88		90		108		117		96		286		468
Total interest and dividend income	20,614		20,092		18,777		19,146		18,922		59,483		58,341

Interest expense
Interest expense on deposits	2,387		2,744		3,114		3,557		4,104		8,245		14,623
Interest expense on borrowings	503		769		1,008		1,285		1,210		2,280		3,187
Total interest expense	2,890		3,513		4,122		4,842		5,314		10,525		17,810

Net interest income	17,724		16,579		14,655		14,304		13,608		48,958		40,531
Provision (credit) for loan losses	134		(20)		(296)		709		712		(182)		6,896
Net interest income after provision (credit) for loan losses	17,590		16,599		14,951		13,595		12,896		49,140		33,635

Noninterest income
Gains and fees from sales of loans	924		814		513		16		27		2,251		27
Bank owned life insurance	271		251		231		241		242		753		726
Service charges and fees	199		217		199		210		190		615		578
Gain on sale of other real estate owned, net	—		—		—		—		19		—		19
Other	43		158		1,013		154		136		1,213		913
Total noninterest income	1,437		1,440		1,956		621		614		4,832		2,263

Noninterest expense
Salaries and employee benefits	4,782		3,960		4,769		5,453		5,295		13,511		15,902
Occupancy and equipment	2,615		3,250		2,406		4,516		2,266		8,271		6,410
Data processing	632		833		512		1,658		529		1,977		1,558
Professional services	498		547		587		591		374		1,632		1,519
Director fees	324		327		317		331		301		968		883
FDIC insurance	298		300		403		262		176		1,001		529
Marketing	186		140		(9)		118		151		317		512
Other	1,035		695		653		774		637		2,383		1,797
Total noninterest expense	10,370		10,052		9,638		13,703		9,729		30,060		29,110

Income before income tax expense	8,657		7,987		7,269		513		3,781		23,912		6,788
Income tax expense	1,802		1,759		1,579		177		790		5,140		1,220
Net income	$	6,855	$	6,228	$	5,690	$	336	$	2,991	$	18,772	$	5,568

Earnings Per Common Share:
Basic	$	0.88	$	0.79	$	0.72	$	0.04	$	0.38	$	2.38	$	0.71
Diluted	$	0.87	$	0.79	$	0.71	$	0.04	$	0.38	$	2.37	$	0.71

Weighted Average Common Shares Outstanding:
Basic	7,677,822		7,722,481		7,758,540		7,726,926		7,721,247		7,721,943		7,728,798
Diluted	7,738,758		7,768,026		7,800,777		7,728,206		7,721,459		7,779,632		7,749,199
Dividends per common share	$	0.18	$	0.14	$	0.14	$	0.14	$	0.14	$	0.46	$	0.42

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

	For the Quarter Ended										For the Nine Months Ended
	September 30, 2021		June 30, 2021		March 31, 2021		December 31, 2020		September 30, 2020		September 30, 2021		September 30, 2020
Performance ratios:
Return on average assets⁽¹⁾	1.22	%	1.11	%	1.02	%	0.06	%	0.55	%	1.12	%	0.36	%
Return on average stockholders' equity⁽¹⁾	14.09	%	13.06	%	12.67	%	0.75	%	6.87	%	13.29	%	4.23	%
Return on average tangible common equity⁽¹⁾	14.29	%	13.25	%	12.86	%	0.76	%	6.98	%	13.48	%	4.30	%
Net interest margin	3.39	%	3.12	%	2.74	%	2.66	%	2.67	%	3.08	%	2.81	%
Efficiency ratio⁽²⁾	54.1	%	55.7	%	58.0	%	91.2	%	68.4	%	55.8	%	67.9	%
Net loan charge-offs as a % of average loans	—	%	0.23	%	0.01	%	—	%	—	%	0.24	%	—	%
Dividend payout ratio⁽³⁾	20.69	%	17.72	%	19.72	%	350.00	%	36.84	%	19.41	%	59.15	%

(1) 2020 performance ratios were negatively impacted by 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
	September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020
Capital ratios:
Total Common Equity Tier 1 Capital to Risk-Weighted Assets⁽¹⁾	10.59		%	10.95		%	11.02		%	11.06		%	12.36		%
Total Capital to Risk-Weighted Assets⁽¹⁾	11.44		%	11.84		%	12.17		%	12.28		%	13.57		%
Tier I Capital to Risk-Weighted Assets⁽¹⁾	10.59		%	10.95		%	11.02		%	11.06		%	12.36		%
Tier I Capital to Average Assets⁽¹⁾	9.61		%	9.19		%	8.82		%	8.44		%	9.58		%
Tangible common equity to tangible assets	8.70		%	8.30		%	8.27		%	7.73		%	7.83		%
Tangible book value per common share⁽²⁾	$	25.25		$	24.40		$	23.99		$	22.43		$	22.20

(1) Represents Bank ratios. Current period capital ratios are preliminary subject to finalization of the FDIC Call Report.

(2) Excludes unvested restricted shares of 178,797, 184,548, 186,485, 163,369, and 170,083 as of September 30, 2021, June 30, 2021, March 31, 2021, December 31, 2020, and September 30, 2020, respectively.

BANKWELL FINANCIAL GROUP, INC. ASSET QUALITY (unaudited) (Dollars in thousands)

	For the Quarter Ended
	September 30, 2021		June 30, 2021		March 31, 2021		December 31, 2020		September 30, 2020
Allowance for loan losses:
Balance at beginning of period	$	16,672	$	20,545	$	21,009	$	20,372	$	19,662
Charge-offs:
Commercial real estate	—		(3,814)		(163)		—		—
Commercial business	—		(51)		—		(75)		—
Consumer	(15)		(4)		(14)		(11)		(4)
Total charge-offs	(15)		(3,869)		(177)		(86)		(4)
Recoveries:
Commercial business	11		16		—		14		—
Consumer	1		—		9		—		2
Total recoveries	12		16		9		14		2
Net loan charge-offs	(3)		(3,853)		(168)		(72)		(2)
Provision (credit) for loan losses	134		(20)		(296)		709		712
Balance at end of period	$	16,803	$	16,672	$	20,545	$	21,009	$	20,372

	As of
	September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020
Asset quality:
Nonaccrual loans
Residential real estate	$	1,849		$	1,160		$	1,289		$	1,492		$	1,596
Commercial real estate	16,314			15,392			19,277			21,093			4,812
Commercial business	1,754			1,780			1,803			1,834			3,760
Construction	8,997			8,997			8,997			8,997			—
Total nonaccrual loans	28,914			27,329			31,366			33,416			10,168
Other real estate owned	—			—			—			—			—
Total nonperforming assets	$	28,914		$	27,329		$	31,366		$	33,416		$	10,168

Nonperforming loans as a % of total loans	1.58		%	1.57		%	1.87		%	2.06		%	0.63		%
Nonperforming assets as a % of total assets	1.30		%	1.20		%	1.40		%	1.48		%	0.46		%
Allowance for loan losses as a % of total loans	0.92		%	0.96		%	1.23		%	1.29		%	1.25		%
Allowance for loan losses as a % of nonperforming loans	58.11		%	61.00		%	65.50		%	62.87		%	200.35		%

Total nonaccrual loans declined $4.5 million to $28.9 million as of September 30, 2021 when compared to December 31, 2020 partially a result of the charge-offs recognized in the second quarter of 2021. The Bank continues work-out activity on its nonaccrual loan population. Nonperforming assets as a percentage of total assets was 1.30% at September 30, 2021, down from 1.48% at December 31, 2020. The allowance for loan losses at September 30, 2021 was $16.8 million, representing 0.92% of total loans.

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

Period End Loan Composition	September 30, 2021		June 30, 2021		December 31, 2020		Current QTD % Change		YTD % Change
Residential Real Estate	$	90,110	$	100,260	$	113,557	(10.1)	%	(20.6)	%
Commercial Real Estate⁽¹⁾	1,337,896		1,266,731		1,148,383		5.6		16.5
Construction	94,665		82,805		87,007		14.3		8.8
Total Real Estate Loans	1,522,671		1,449,796		1,348,947		5.0		12.9

Commercial Business⁽²⁾	292,825		279,814		276,601		4.6		5.9

Consumer	9,050		8,883		79		1.9		N/M⁽³⁾
Total Loans	$	1,824,546	$	1,738,493	$	1,625,627	4.9	%	12.2	%

(1) Includes owner occupied commercial real estate. (2) Includes $1.6 million, $7.9 million, and $34.8 million of PPP loans at September 30, 2021, June 30, 2021 and December 31, 2020, respectively. (3) Metric not meaningful.

Gross loans totaled $1.8 billion at September 30, 2021, an increase of $198.9 million compared to December 31, 2020. Excluding PPP loans, gross loans increased by $232.1 million, or 14.6%, at September 30, 2021 when compared to December 31, 2020.

Period End Deposit Composition	September 30, 2021		June 30, 2021		December 31, 2020		Current QTD % Change		YTD % Change
Noninterest bearing demand	$	338,705	$	328,473	$	270,235	3.1	%	25.3	%
NOW	103,180		136,558		101,737		(24.4)		1.4
Money Market	835,210		814,083		669,364		2.6		24.8
Savings	188,581		173,943		158,750		8.4		18.8
Time	417,147		486,245		627,230		(14.2)		(33.5)
Total Deposits	$	1,882,823	$	1,939,302	$	1,827,316	(2.9)	%	3.0	%

Total deposits were $1.9 billion at September 30, 2021, compared to $1.8 billion at December 31, 2020, an increase of $55.5 million, or 3.0%.

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

	For the Quarter Ended
Noninterest income	September 30, 2021		June 30, 2021		September 30, 2020		Sep 21 vs. June 21 % Change		Sep 21 vs. Sep 20 % Change
Gains and fees from sales of loans	$	924	$	814	$	27	13.5	%	3,322.2	%
Bank owned life insurance	271		251		242		8.0		12.0
Service charges and fees	199		217		190		(8.3)		4.7
Gain on sale of other real estate owned, net	—		—		19		N/A		(100.0)
Other	43		158		136		(72.8)		(68.4)
Total noninterest income	$	1,437	$	1,440	$	614	(0.2)	%	134.0	%

	For the Nine Months Ended
Noninterest income	September 30, 2021		September 30, 2020		% Change
Gains and fees from sales of loans	$	2,251	$	27	8,237.0	%
Bank owned life insurance	753		726		3.7
Service charges and fees	615		578		6.4
Gain on sale of other real estate owned, net	—		19		(100.0)
Other	1,213		913		32.9
Total noninterest income	$	4,832	$	2,263	113.5	%

Noninterest income increased by $0.8 million to $1.4 million for the quarter ended September 30, 2021 compared to the quarter ended September 30, 2020. Noninterest income increased by $2.6 million to $4.8 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The increase in noninterest income was driven by resumed loan sales, totaling $0.9 million and $2.3 million for the quarter and nine months ended September 30, 2021, respectively. In addition, the increase in noninterest income for the nine months ended September 30, 2021 was impacted by a one-time federal payroll tax credit for COVID-19 of $0.9 million, partially offset by $0.4 million of non-recurring interest rate swap fees recognized during the nine months ended September 30, 2020.

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

	For the Quarter Ended
Noninterest expense	September 30, 2021		June 30, 2021		September 30, 2020		Sep 21 vs. June 21 % Change		Sep 21 vs. Sep 20 % Change
Salaries and employee benefits	$	4,782	$	3,960	$	5,295	20.8	%	(9.7)	%
Occupancy and equipment	2,615		3,250		2,266		(19.5)		15.4
Data processing	632		833		529		(24.1)		19.5
Professional services	498		547		374		(9.0)		33.2
Director fees	324		327		301		(0.9)		7.6
FDIC insurance	298		300		176		(0.7)		69.3
Marketing	186		140		151		32.9		23.2
Other	1,035		695		637		48.9		62.5
Total noninterest expense	$	10,370	$	10,052	$	9,729	3.2	%	6.6	%

	For the Nine Months Ended
Noninterest expense	September 30, 2021		September 30, 2020		% Change
Salaries and employee benefits	$	13,511	$	15,902	(15.0)	%
Occupancy and equipment	8,271		6,410		29.0
Data processing	1,977		1,558		26.9
Professional services	1,632		1,519		7.4
FDIC insurance	1,001		529		89.2
Director fees	968		883		9.6
Marketing	317		512		(38.1)
Other	2,383		1,797		32.6
Total noninterest expense	$	30,060	$	29,110	3.3	%

Noninterest expense increased by $0.6 million to $10.4 million for the quarter ended September 30, 2021 compared to the quarter ended September 30, 2020. The increase in noninterest expense was primarily driven by an increase in occupancy and equipment expense and other expense, partially offset by a decrease in salaries and employee benefits expense.

Noninterest expense increased by $1.0 million to $30.1 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase in noninterest expense was primarily driven by an increase in occupancy and equipment expense, data processing expense, FDIC insurance expense and other expense, partially offset by a decrease in salaries and employee benefits expense.

Occupancy and equipment expense totaled $2.6 million for the quarter ended September 30, 2021, an increase of $0.3 million when compared to the same period in 2020. Occupancy and equipment expense totaled $8.3 million for the nine months ended September 30, 2021, an increase of $1.9 million when compared to the same period in 2020. The increase in occupancy and equipment expense was primarily due to additional one-time charges 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.

Data processing expense totaled $2.0 million for the nine months ended September 30, 2021, an increase of $0.4 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 $1.0 million for the nine months ended September 30, 2021, an increase of $0.5 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 the first half 2021.

Salaries and employee benefits expense totaled $4.8 million for the quarter ended September 30, 2021, a decrease of $0.5 million when compared to the same period in 2020. Salaries and employee benefits expense totaled $13.5 million for the nine months ended September 30, 2021, a decrease of $2.4 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 134 at September 30, 2021 compared to 142 for the same period in 2020. Average full time equivalent employees totaled 127 for the nine months ended September 30, 2021 compared to 151 for the same period in 2020. In addition, salaries and employee benefits expense also benefited by one-time deferrals of $0.6 million for the nine months ended September 30, 2021 in costs associated with a new online banking and other systems.

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, 2021			June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020
Total Equity	$	196,177		$	190,795		$	187,943		$	176,602		$	174,267
Less:
Goodwill	2,589			2,589			2,589			2,589			2,589
Other intangibles	48			58			67			76			160
Tangible Common Equity	$	193,540		$	188,148		$	185,287		$	173,937		$	171,518

Total Assets	$	2,226,688		$	2,269,825		$	2,244,467		$	2,253,747		$	2,193,022
Less:
Goodwill	2,589			2,589			2,589			2,589			2,589
Other intangibles	48			58			67			76			160
Tangible Assets	$	2,224,051		$	2,267,178		$	2,241,811		$	2,251,082		$	2,190,273

Tangible Common Equity to Tangible Assets	8.70		%	8.30		%	8.27		%	7.73		%	7.83		%

	As of
Computation of Tangible Book Value per Common Share	September 30, 2021		June 30, 2021		March 31, 2021		December 31, 2020		September 30, 2020
Total shareholders' equity	$	196,177	$	190,795	$	187,943	$	176,602	$	174,267
Less:
Preferred stock	—		—		—		—		—
Common shareholders' equity	$	196,177	$	190,795	$	187,943	$	176,602	$	174,267
Less:
Goodwill	2,589		2,589		2,589		2,589		2,589
Other intangibles	48		58		67		76		160
Tangible common shareholders' equity	$	193,540	$	188,148	$	185,287	$	173,937	$	171,518
Common shares	7,842,824		7,895,101		7,908,630		7,919,278		7,896,503
Less:
Shares of unvested restricted stock	178,797		184,548		186,485		163,369		170,083
Common shares less unvested restricted stock	7,664,027		7,710,553		7,722,145		7,755,909		7,726,420
Book value per share	$	25.60	$	24.74	$	24.34	$	22.77	$	22.55
Less:
Effects of intangible assets	$	0.34	$	0.34	$	0.34	$	0.34	$	0.36

Tangible Book Value per Common Share	$	25.25	$	24.40	$	23.99	$	22.43	$	22.20

BANKWELL FINANCIAL GROUP, INC. RECONCILIATION OF GAAP TO NON-GAAP MEASURES (unaudited) - Continued (Dollars in thousands)

	For the Quarter Ended															For the Nine Months Ended
Computation of Efficiency Ratio	September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			September 30, 2021			September 30, 2020
Noninterest expense	$	10,370		$	10,052		$	9,638		$	13,703		$	9,729		$	30,060		$	29,110
Less:
Amortization of intangible assets	9			9			9			84			18			28			54
Other real estate owned expenses	—			—			—			—			—			—			6
Adjusted noninterest expense	$	10,361		$	10,043		$	9,629		$	13,619		$	9,711		$	30,032		$	29,050
Net interest income	$	17,724		$	16,579		$	14,655		$	14,304		$	13,608		$	48,958		$	40,531
Noninterest income	1,437			1,440			1,956			621			614			4,832			2,263
Less:
Net gain on sale of available for sale securities	—			—			—			—			—			—			—
Gain on sale of other real estate owned, net	—			—			—			—			19			—			19
Operating revenue	$	19,161		$	18,019		$	16,611		$	14,925		$	14,203		$	53,790		$	42,775

Efficiency ratio	54.1		%	55.7		%	58.0		%	91.2		%	68.4		%	55.8		%	67.9		%

	For the Quarter Ended															For the Nine Months Ended
Computation of Return on Average Tangible Common Equity	September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			September 30, 2021			September 30, 2020
Net Income Attributable to Common Shareholders	$	6,855		$	6,228		$	5,690		$	336		$	2,991		$	18,772		$	5,568
Total average shareholders' equity	$	192,993		$	191,224		$	182,058		$	178,439		$	173,162		$	188,794		$	175,838
Less:
Average Goodwill	2,589			2,589			2,589			2,589			2,589			2,589			2,589
Average Other intangibles	54			64			73			153			172			64			190
Average tangible common equity	$	190,350		$	188,571		$	179,396		$	175,697		$	170,401		$	186,141		$	173,059

Annualized Return on Average Tangible Common Equity	14.29		%	13.25		%	12.86		%	0.76		%	6.98		%	13.48		%	4.30		%

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, 2021						September 30, 2020
	Average Balance		Interest		Yield/ Rate ⁽⁴⁾		Average Balance		Interest		Yield/ Rate ⁽⁴⁾
Assets:
Cash and Fed funds sold	$	209,500	$	88	0.17	%	$	312,078	$	96	0.12	%
Securities⁽¹⁾	105,030		766		2.92		96,448		776		3.22
Loans:
Commercial real estate	1,270,375		14,345		4.42		1,087,765		12,570		4.52
Residential real estate	95,100		809		3.40		125,069		1,097		3.51
Construction	88,728		845		3.73		94,984		1,029		4.24
Commercial business	314,484		3,707		4.61		322,066		3,329		4.04
Consumer	8,870		89		3.99		121		2		7.37
Total loans	1,777,557		19,795		4.36		1,630,005		18,027		4.33
Federal Home Loan Bank stock	3,133		16		2.04		7,835		77		3.91
Total earning assets	2,095,220		$	20,665	3.86	%	2,046,366		$	18,976	3.63	%
Other assets	131,670						132,617
Total assets	$	2,226,890					$	2,178,983

Liabilities and shareholders' equity:
Interest bearing liabilities:
NOW	$	111,813	$	51	0.18	%	$	87,890	$	40	0.18	%
Money market	824,203		1,053		0.51		517,638		859		0.66
Savings	182,848		96		0.21		163,135		237		0.58
Time	448,218		1,187		1.05		757,176		2,968		1.56
Total interest bearing deposits	1,567,082		2,387		0.60		1,525,839		4,104		1.07
Borrowed Money	72,960		503		2.70		200,237		1,210		2.36
Total interest bearing liabilities	1,640,042		$	2,890	0.70	%	1,726,076		$	5,314	1.22	%
Noninterest bearing deposits	341,303						226,473
Other liabilities	52,552						53,272
Total liabilities	2,033,897						2,005,821
Shareholders' equity	192,993						173,162
Total liabilities and shareholders' equity	$	2,226,890					$	2,178,983
Net interest income⁽²⁾			$	17,775					$	13,662
Interest rate spread					3.16	%					2.41	%
Net interest margin⁽³⁾					3.39	%					2.67	%

(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 $54 thousand for the quarters ended September 30, 2021 and 2020, 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, 2021						September 30, 2020
	Average Balance		Interest		Yield/ Rate ⁽⁴⁾		Average Balance		Interest		Yield/ Rate ⁽⁴⁾
Assets:
Cash and Fed funds sold	$	315,102	$	286	0.12	%	$	207,058	$	468	0.30	%
Securities⁽¹⁾	103,192		2,315		2.99		96,761		2,289		3.15
Loans:
Commercial real estate	1,188,049		40,802		4.53		1,094,956		38,460		4.61
Residential real estate	104,320		2,669		3.41		134,369		3,636		3.61
Construction	97,828		2,769		3.73		98,539		3,350		4.47
Commercial business	302,019		10,495		4.58		289,959		10,017		4.54
Consumer	7,601		226		3.97		130		8		8.15
Total loans	1,699,817		56,961		4.42		1,617,953		55,471		4.50
Federal Home Loan Bank stock	4,608		72		2.09		7,547		272		4.81
Total earning assets	2,122,719		$	59,634	3.70	%	1,929,319		$	58,500	3.98	%
Other assets	119,098						125,957
Total assets	$	2,241,817					$	2,055,276

Liabilities and shareholders' equity:
Interest bearing liabilities:
NOW	$	110,637	$	148	0.18	%	$	76,661	$	99	0.17	%
Money market	781,178		2,944		0.50		473,485		3,213		0.91
Savings	170,749		313		0.24		170,262		1,204		0.94
Time	532,278		4,840		1.22		721,051		10,107		1.87
Total interest bearing deposits	1,594,842		8,245		0.69		1,441,459		14,623		1.36
Borrowed Money	108,737		2,280		2.77		187,177		3,187		2.24
Total interest bearing liabilities	1,703,579		$	10,525	0.83	%	1,628,636		$	17,810	1.46	%
Noninterest bearing deposits	303,421						201,384
Other liabilities	46,023						49,418
Total liabilities	2,053,023						1,879,438
Shareholders' equity	188,794						175,838
Total liabilities and shareholders' equity	$	2,241,817					$	2,055,276
Net interest income⁽²⁾			$	49,109					$	40,690
Interest rate spread					2.87	%					2.52	%
Net interest margin⁽³⁾					3.08	%					2.81	%

(1) Average balances and yields for securities are based on amortized cost.

(2) The adjustment for securities and loans taxable equivalency amounted to $151 thousand and $159 thousand for the nine months ended September 30, 2021 and 2020, 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211027006126/en/

Bankwell Financial Group Reports Record Net Income for the Third Quarter; Declares Fourth Quarter Dividend; and Authorizes an Additional 200 Thousand Shares for Its Share Repurchase Program