Business Wire | Jul 28, 2020 04:03PM EDT

Bankwell Financial Group Reports Operating Results for the Second Quarter, Continued Reserve Build and Maintains Quarterly Dividend

Jul. 28, 2020

NEW CANAAN, Conn.--(BUSINESS WIRE)--Jul. 28, 2020--Bankwell Financial Group, Inc. (NASDAQ:BWFG) reported GAAP net income of $1.2 million, or $0.16 per share, for the second quarter of 2020, versus $5.6 million, or $0.71 per share, for the same period in 2019. The decline in net income was largely driven by an increase in the loan loss provision due to increased credit risk relating to economic disruption and uncertainty caused by the Coronavirus (COVID-19) pandemic.

The Company's Board of Directors declared a $0.14 per share cash dividend, payable August 24, 2020 to shareholders of record on August 14, 2020.

We recommend reading this earnings release in conjunction with the Second Quarter 2020 Investor Presentation, located at http://investor.mybankwell.com/Presentations and included as an exhibit to our July 28, 2020 Current Report on Form 8-K, for further details regarding the impact of the COVID-19 pandemic on our operations and financial results.

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

"I am thankful for our employees' exemplary performance during this pandemic. We have performed our role as an essential service provider with the utmost sense of purpose, and have continued to assist our customers and our communities in a meaningful way. Our performance metrics, after adjusting for various COVID-19 related items, highlight a solid foundation for profitability and growth. On the credit side, our loan deferral population stood at approximately 22% as of June 30th. Although the course of our national crisis will be uncertain, I am happy to note that loans on deferral are expected to drop to below 10% during the third quarter."

Second Quarter 2020 Highlights:

* Second quarter provision for loan losses totaled $3.0 million, which included an additional reserve build of $4.9 million related to increased risk due to the COVID-19 pandemic. The increase was partially offset by changes in the loan portfolio composition and growth. * The allowance for loan losses was $19.7 million and represents 1.22% of total loans as of June 30, 2020, compared to an allowance for loan losses of $13.5 million, representing 0.84% of total loans as of December 31, 2019. * Funded 381 Paycheck Protection Program ("PPP") loans for a total of $60.4 million. * Granted COVID-19 related deferrals on loans (excluding SBA loans which are paid for 6 months by the SBA on behalf of borrowers) totaling $339.9 million. Further detail regarding COVID-19 related loan deferrals is included in the Second Quarter 2020 Investor Presentation. * Total deposits were $1.6 billion at June 30, 2020 compared to $1.5 billion at December 31, 2019, primarily reflecting a temporary increase in short term time deposits to expand on-balance sheet liquidity. * Noninterest bearing deposits increased 12% at June 30, 2020 compared to December 31, 2019. * The loan-to-deposit ratio for the Bank was 99.2% at June 30, 2020, reflecting the above-mentioned increase in deposits. * Total gross loans were $1.6 billion at June 30, 2020, increasing slightly when compared to December 31, 2019. * Investment securities totaled $100.6 million and represent 5% of total assets. * Total noninterest income was $0.6 million for the quarter ended June 30, 2020, or 4% of total revenue. * The tangible common equity ratio and tangible book value per share, as of June 30, 2020, were 8.21% and $21.70, respectively.

Earnings and Performance

Revenues (net interest income plus noninterest income) for the quarter ended June 30, 2020 were $14.2 million, versus $14.9 million for the quarter ended June 30, 2019. Revenues for the six months ended June 30, 2020 were $28.6 million, versus $30.5 million for the six months ended June 30, 2019. The decrease in revenues was attributable to a decline in income from loan prepayments and the absence of loan sales during the quarter and six month periods ended June 30, 2020 when compared to the same periods in 2019. The decrease in revenues was also driven by lower loan yields as loans are re-priced in the current low interest rate environment. The decrease in revenues was partially offset by a decline in interest expense, driven by lower interest rates on deposits when compared to the same periods in 2019.

Net income for the quarter ended June 30, 2020 was $1.2 million, versus $5.6 million for the quarter ended June 30, 2019. Net income for the six months ended June 30, 2020 was $2.6 million, versus $10.7 million for the six months ended June 30, 2019. The decrease in net income for the quarter and six month periods ended June 30, 2020 when compared to the same periods in 2019 was largely driven by an increase in the provision for loan losses due to COVID-19 related loan loss reserves, an increase in noninterest expense and the aforementioned decline in revenues. The provision for loan losses related to COVID-19 totaled $4.9 million and $7.9 million for the quarter and six months ended June 30, 2020, respectively.

Basic and diluted earnings per share were each $0.16 for the quarter ended June 30, 2020 compared to basic and diluted earnings per share of $0.71 each for the quarter ended June 30, 2019. Basic and diluted earnings per share were each $0.33 for the six months ended June 30, 2020 compared to basic and diluted earnings per share of $1.36 and $1.35, respectively, for the six months ended June 30, 2019.

The net interest margin (fully taxable equivalent basis) for the quarters ended June 30, 2020 and June 30, 2019 was 2.81% and 3.07%, respectively. The net interest margin for the six months ended June 30, 2020 and June 30, 2019 was 2.89% and 3.13%, respectively. The decrease in net interest margin for the quarter and six month periods ended June 30, 2020, when compared to the same periods in 2019, was primarily due to excess cash held at low interest rates to maintain a higher level of liquidity during the COVID-19 pandemic. Excluding the impact of additional liquidity and PPP loans, the net interest margin would increase approximately 21 basis points for the six months ended June 30, 2020.

Financial Condition

Assets totaled $2.0 billion at June 30, 2020, compared to assets of $1.9 billion at December 31, 2019. The increase in assets is primarily driven by an increase in cash and cash equivalents in order to maintain a higher level of liquidity during the COVID-19 pandemic. Gross loans totaled $1.6 billion at June 30, 2020, an increase of $10.2 million compared to December 31, 2019. Deposits totaled $1.6 billion at June 30, 2020, compared to deposits of $1.5 billion at December 31, 2019. The increase in deposits was a result of a temporary increase in short term time deposits to expand on-balance sheet liquidity as well as an increase in noninterest bearing deposits as a result of our ongoing treasury management efforts.

Capital

Shareholders' equity totaled $170.4 million as of June 30, 2020, a decrease of $12.0 million compared to December 31, 2019, primarily a result of a $12.2 million unfavorable impact to accumulated other comprehensive income driven by fair value marks related to hedge positions involving interest rate swaps, as well as dividends paid of $2.2 million and common stock repurchases of $1.0 million. The decrease was partially offset by net income for the six months ended June 30, 2020 of $2.6 million. The marks on the interest rate swaps are driven by lower long term market interest rates in 2020 when compared to 2019. The Company's interest rate swaps are primarily 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. As of June 30, 2020, the tangible common equity ratio and tangible book value per share were 8.21% and $21.70, respectively.

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 and tangible book value per share are useful to evaluate the relative strength of the Company's capital position. We utilize these measures for internal planning and forecasting purposes. These non-GAAP financial measures should not be considered a substitute for GAAP basis measures and results, and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure.

BANKWELLFINANCIAL GROUP,INC.

CONSOLIDATEDBALANCE SHEETS (unaudited)

(Dollars inthousands)

June 30, March 31, December 31, June 30, 2020 2020 2019 2019

ASSETS

Cash and due from $ 201,380 $ 203,569 $ 78,051 $ 75,647 banks

Federal funds 5,886 6,427 - 3,237 sold

Cash and cash 207,266 209,996 78,051 78,884 equivalents



Investment securities

Marketable equitysecurities, at 2,195 2,289 2,118 2,090 fair value

Available forsale investment 82,220 82,342 82,439 93,017 securities, atfair value

Held to maturityinvestment 16,196 16,252 16,308 21,318 securities, atamortized cost

Total investment 100,611 100,883 100,865 116,425 securities

Loans receivable(net of allowancefor loan lossesof $19,662,$16,686, $13,509,and $13,890 at 1,590,995 1,602,146 1,588,840 1,551,620 June 30, 2020,March 31, 2020,December 31,2019, and June30, 2019,respectively)

Other real estate 180 - - 1,217 owned

Accrued interest 6,774 5,867 5,959 6,165 receivable

Federal Home LoanBank stock, at 7,835 6,507 7,475 7,475 cost

Premises and 27,177 27,835 28,522 29,060 equipment, net

Bank-owned life 42,167 41,926 41,683 41,178 insurance

Goodwill 2,589 2,589 2,589 2,589

Other intangible 178 196 214 251 assets

Deferred income 11,352 10,009 5,788 5,596 taxes, net

Other assets 46,511 45,671 22,196 19,205

Total assets $ 2,043,635 $ 2,053,625 $ 1,882,182 $ 1,859,665



LIABILITIES ANDSHAREHOLDERS' EQUITY

Liabilities

Deposits

Noninterest $ 214,789 $ 168,448 $ 191,518 $ 161,704 bearing deposits

Interest bearing 1,405,175 1,512,684 1,300,385 1,316,027 deposits

Total deposits 1,619,964 1,681,132 1,491,903 1,477,731



Advances from theFederal Home Loan 175,000 125,000 150,000 150,000 Bank

Subordinated 25,233 25,220 25,207 25,181 debentures

Accrued expensesand other 53,078 52,059 32,675 29,813 liabilities

Total liabilities 1,873,275 1,883,411 1,699,785 1,682,725



Shareholders' equity

Common stock, no 120,381 119,953 120,589 120,064 par value

Retained earnings 69,712 69,595 69,324 63,801

Accumulated othercomprehensive (19,733) (19,334) (7,516) (6,925) loss

Totalshareholders' 170,360 170,214 182,397 176,940 equity



Total liabilitiesand shareholders' $ 2,043,635 $ 2,053,625 $ 1,882,182 $ 1,859,665 equity

BANKWELLFINANCIALGROUP, INC.

CONSOLIDATEDSTATEMENTSOF INCOME (unaudited)

(Dollars inthousands,except sharedata)

For the Quarter Ended For the Six Months Ended

June 30, March 31, December June 30, June 30, June 30, 2020 2020 31, 2019 2020 2019 2019

Interest anddividend income

Interest andfees on $ 18,459 $ 18,985 $ 18,648 $ 19,540 $ 37,444 $ 39,636 loans

Interest anddividends on 778 825 858 992 1,603 1,989 securities

Interest oncash and 86 286 427 514 372 897 cashequivalents

Totalinterest and 19,323 20,096 19,933 21,046 39,419 42,522 dividendincome



Interest expense

Interestexpense on 4,810 5,709 5,948 6,319 10,519 12,419 deposits

Interestexpense on 876 1,101 1,103 1,132 1,977 2,235 borrowings

Totalinterest 5,686 6,810 7,051 7,451 12,496 14,654 expense



Net interest 13,637 13,286 12,882 13,595 26,923 27,868 income

Provision(credit) for 2,999 3,185 310 (841) 6,184 (646) loan losses

Net interestincome afterprovision 10,638 10,101 12,572 14,436 20,739 28,514 (credit) forloan losses



Noninterest income

Bank ownedlife 241 243 250 254 484 503 insurance

Servicecharges and 171 217 247 263 388 512 fees

Gains andfees from - - 382 617 - 706 sales ofloans

Net gain onsale ofavailable - - - 76 - 76 for salesecurities

Other 165 612 169 126 777 847

Totalnoninterest 577 1,072 1,048 1,336 1,649 2,644 income



Noninterest expense

Salaries andemployee 5,227 5,380 5,162 4,555 10,607 9,391 benefits

Occupancyand 2,235 1,909 1,928 1,833 4,144 3,720 equipment

Data 493 536 499 551 1,029 1,063 processing

Professional 434 711 402 519 1,145 1,109 services

Director 287 295 224 215 582 404 fees

FDIC 283 70 - 76 353 199 insurance

Marketing 199 162 220 348 361 541

Amortizationof 18 18 18 19 36 38 intangibles

Other 546 578 771 639 1,124 1,265

Totalnoninterest 9,722 9,659 9,224 8,755 19,381 17,730 expense



Incomebefore 1,493 1,514 4,396 7,017 3,007 13,428 income taxexpense

Income tax 279 151 924 1,441 430 2,772 expense

Net income $ 1,214 $ 1,363 $ 3,472 $ 5,576 $ 2,577 $ 10,656



Earnings PerCommon Share:

Basic $ 0.16 $ 0.17 $ 0.44 $ 0.71 $ 0.33 $ 1.36

Diluted $ 0.16 $ 0.17 $ 0.44 $ 0.71 $ 0.33 $ 1.35



WeightedAverageCommon SharesOutstanding:

Basic 7,715,094 7,750,135 7,745,227 7,773,466 7,732,615 7,766,999

Diluted 7,715,295 7,778,762 7,773,780 7,790,760 7,748,104 7,791,975

Dividendsper common $ 0.14 $ 0.14 $ 0.13 $ 0.13 $ 0.28 $ 0.26 share

BANKWELL FINANCIALGROUP, INC.

CONSOLIDATED FINANCIAL HIGHLIGHTS(unaudited)

For the Quarter Ended For the Six Months Ended

June March December June June June 30, 31, 31, 30, 30, 30, 2020 2020 2019 2019 2020 2019

Performance ratios:

Return on average 0.23 % 0.29 % 0.73 % 1.20 % 0.26 % 1.15 %assets^(1)

Return on averagestockholders' equity 2.82 % 3.03 % 7.68 % 12.48 % 2.92 % 12.05 %^(1)

Return on averagetangible common 2.86 % 3.07 % 7.80 % 12.68 % 2.97 % 12.24 %equity^(1)

Net interest margin 2.81 % 2.98 % 2.92 % 3.07 % 2.89 % 3.13 %

Efficiency ratio^(2) 68.2 % 67.1 % 66.1 % 58.6 % 67.7 % 58.0 %

Net loan charge-offsas a % of average - % - % - % 0.04 % - % 0.06 %loans

Dividend payout 87.50 % 82.35 % 29.55 % 18.31 % 84.85 % 19.26 %ratio^(3)

(1) June 30, 2020 and March 31, 2020 performance ratios are negatively impacted by incremental COVID-19 related loan loss reserves totaling approximately $4.9 million and $3.0 million, respectively. Please refer to the Second and First Quarter 2020 Investor Presentations for more detailed information on the impact of the incremental loan COVID-19 related loss reserve on the Company's performance ratios.

(2) Efficiency ratio is defined as noninterest expense, less other real estate owned expenses and amortization of intangible assets, divided by our operating revenue, which is equal to net interest income plus noninterest income excluding gains and losses on sales of securities and gains and losses on other real estate owned. In our judgment, the adjustments made to operating revenue allow investors and analysts to better assess our operating expenses in relation to our core operating revenue by removing the volatility that is associated with certain one-time items and other discrete items that are unrelated to our core business.

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

As of

June 30, March 31, December June 30, 2020 2020 31, 2019 2019

Capital ratios:

Total Common Equity Tier 1 Capital 12.44 % 12.14 % 12.53 % 12.40 %to Risk-Weighted Assets^(1)

Total Capital to Risk-Weighted 13.63 % 13.13 % 13.35 % 13.26 %Assets^(1)

Tier I Capital to Risk-Weighted 12.44 % 12.14 % 12.53 % 12.40 %Assets^(1)

Tier I Capital to Average Assets^ 9.93 % 10.84 % 10.99 % 10.75 %(1)

Tangible common equity to tangible 8.21 % 8.16 % 9.56 % 9.38 %assets

Tangible book value per common $ 21.70 $ 21.69 $ 23.15 $ 22.47 share^(2)

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

(2) Excludes unvested restricted shares of 165,708, 154,012, 110,975, and 94,598 as of June 30, 2020, March 31, 2020, December 31, 2019, and June 30, 2019, respectively.

BANKWELL FINANCIAL GROUP,INC.

ASSET QUALITY (unaudited)

(Dollars in thousands)

For the Quarter Ended

June 30, March 31, December June 30, 2020 2020 31, 2019 2019

Allowance for loan losses:

Balance at beginning of $ 16,686 $ 13,509 $ 13,212 $ 15,430 period

Charge-offs:

Residential real estate - - - (565)

Commercial business - (8) (13) (130)

Consumer (23) (2) (5) (13)

Total charge-offs (23) (10) (18) (708)

Recoveries:

Commercial business - 1 1 6

Consumer - 1 4 3

Total recoveries - 2 5 9

Net loan charge-offs (23) (8) (13) (699)

Provision for loan losses 2,999 3,185 310 (841)

Balance at end of period $ 19,662 $ 16,686 $ 13,509 $ 13,890

As of

June 30, March 31, December June 30, 2020 2020 31, 2019 2019

Asset quality:

Nonaccrual loans

Residential real estate $ 1,622 $ 1,532 $ 1,560 $ 1,716

Commercial real estate 5,172 5,339 5,222 4,535

Commercial business 3,783 3,783 3,806 5,437

Total nonaccrual loans 10,577 10,654 10,588 11,688

Other real estate owned 180 - - 1,217

Total nonperforming assets $ 10,757 $ 10,654 $ 10,588 $ 12,905



Nonperforming loans as a % of 0.66 % 0.66 % 0.66 % 0.75 %total loans

Nonperforming assets as a % 0.53 % 0.52 % 0.56 % 0.69 %of total assets

Allowance for loan losses as 1.22 % 1.03 % 0.84 % 0.89 %a % of total loans

Allowance for loan losses as 185.89 % 156.62 % 127.59 % 118.84 %a % of nonperforming loans

Total nonaccrual loans were $10.6 million as of June 30, 2020, of which $4.6 million are guaranteed by the Small Business Administration (SBA). Nonperforming assets as a percentage of total assets was 0.53% at June 30, 2020, down from 0.56% at December 31, 2019. The allowance for loan losses at June 30, 2020 was $19.7 million, representing 1.22% of total loans. The $6.2 million increase in the allowance for loan losses at June 30, 2020 when compared to December 31, 2019 was primarily due to incremental loan loss reserves for increased credit risk relating to economic disruption and uncertainty caused by the COVID-19 pandemic.

BANKWELLFINANCIALGROUP, INC.

LOAN &DEPOSIT PORTFOLIO(unaudited)

(Dollars inthousands)

Period End June 30, March 31, December 31, Current YTD %Loan 2020 2020 2019 QTD ChangeComposition % Change

Residential $ 128,683 $ 139,353 $ 147,109 (7.7) % (12.5) %Real Estate

CommercialReal Estate^ 1,110,562 1,131,206 1,128,614 (1.8) (1.6) (1)

Construction 94,523 107,594 98,583 (12.1) (4.1)

Total Real 1,333,768 1,378,153 1,374,306 (3.2) (2.9) Estate Loans



Commercial 280,811 242,705 230,028 15.7 22.1 Business



Consumer 87 113 150 (23.0) (42.0)

Total Loans $ 1,614,666 $ 1,620,971 $ 1,604,484 (0.4) % 0.6 %



(1) Includes owner occupied commercial real estate.

Period End June 30, March 31, December 31, Current YTD %Deposit 2020 2020 2019 QTD ChangeComposition % Change

Noninterestbearing $ 214,789 $ 168,448 $ 191,518 27.5 % 12.2 %demand

NOW 87,239 69,562 70,020 25.4 24.6

Money Market 482,462 455,634 419,495 5.9 15.0

Savings 162,891 164,673 183,729 (1.1) (11.3)

Time 672,583 822,815 627,141 (18.3) 7.2

Total $ 1,619,964 $ 1,681,132 $ 1,491,903 (3.6) % 8.6 %Deposits

Total deposits were $1.6 billion at June 30, 2020 compared to $1.5 billion at December 31, 2019, an increase of $0.1 billion, or 8.6%. The increase in total deposits was primarily a result of a temporary increase in short term time deposits to expand on-balance sheet liquidity as well as an increase in noninterest bearing deposits as a result of our ongoing treasury management efforts.

BANKWELL FINANCIALGROUP, INC.

NONINTEREST INCOME (unaudited)

(Dollars in thousands)

For the Quarter Ended

June June 20 June 20Noninterest income 30, March 31, June 30, vs. March vs. June 2020 2020 2019 20 % 19 % Change Change

Bank owned life $ 241 $ 243 $ 254 (0.8) % (5.1) %insurance

Service charges and 171 217 263 (21.2) (35.0) fees

Gains and fees from - - 617 N/A (100.0) sales of loans

Net gain on sale ofavailable for sale - - 76 N/A (100.0) securities

Other 165 612 126 (73.0) 31.0

Total noninterest $ 577 $ 1,072 $ 1,336 (46.2) % (56.8) %income

For the Six Months Ended

Noninterest income June 30, June 30, % Change 2020 2019

Bank owned life insurance $ 484 $ 503 (3.8) %

Service charges and fees 388 512 (24.2)

Gains and fees from sales of loans - 706 (100.0)

Net gain on sale of available for sale - 76 (100.0) securities

Other 777 847 (8.3)

Total noninterest income $ 1,649 $ 2,644 (37.6) %

Noninterest income decreased by $0.8 million, or 57%, to $0.6 million for the quarter ended June 30, 2020 compared to the quarter ended June 30, 2019. Noninterest income decreased by $1.0 million, or 38%, to $1.6 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

The decrease in noninterest income was primarily a result of the absence of gains and fees from the sales of loans for the quarter and six months ended June 30, 2020 compared to the same periods in 2019. In addition, the decrease in noninterest income was also driven by certain waived service charges and fees on depository accounts as a courtesy to customers during the COVID-19 pandemic.

BANKWELLFINANCIAL GROUP,INC.

NONINTERESTEXPENSE (unaudited)

(Dollars inthousands)

For the Quarter Ended

June 20 vs. June 20Noninterest June 30, March 31, June 30, March vs. Juneexpense 2020 2020 2019 20 % Change 19 % Change

Salaries and $ 5,227 $ 5,380 $ 4,555 (2.8) % 14.8 %employee benefits

Occupancy and 2,235 1,909 1,833 17.1 21.9 equipment

Data processing 493 536 551 (8.0) (10.5)

Professional 434 711 519 (39.0) (16.4) services

Director fees 287 295 215 (2.7) 33.5

FDIC insurance 283 70 76 304.3 272.4

Marketing 199 162 348 22.8 (42.8)

Amortization of 18 18 19 - (5.3) intangibles

Other 546 578 639 (5.5) (14.6)

Total noninterest $ 9,722 $ 9,659 $ 8,755 0.7 % 11.0 %expense

For the Six Months Ended

Noninterest expense June 30, 2020 June 30, 2019 % Change

Salaries and employee benefits $ 10,607 $ 9,391 12.9 %

Occupancy and equipment 4,144 3,720 11.4

Professional services 1,145 1,109 3.2

Data processing 1,029 1,063 (3.2)

Director fees 582 404 44.1

Marketing 361 541 (33.3)

FDIC insurance 353 199 77.4

Amortization of intangibles 36 38 (5.3)

Other 1,124 1,265 (11.1)

Total noninterest expense $ 19,381 $ 17,730 9.3 %

Noninterest expense increased by $1.0 million, or 11%, to $9.7 million for the quarter ended June 30, 2020 compared to the quarter ended June 30, 2019. Noninterest expense increased by $1.7 million, or 9.3%, to $19.4 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019. The increase in noninterest expense was primarily driven by an increase in salaries and employee benefits and occupancy and equipment expense.

Salaries and employee benefits totaled $5.2 million for the quarter ended June 30, 2020, an increase of $0.7 million when compared to the same period in 2019. Salaries and employee benefits totaled $10.6 million for the six months ended June 30, 2020, an increase of $1.2 million when compared to the same period in 2019. The increase in salaries and employee benefits was primarily driven by an increase in full time equivalent employees. Full time equivalent employees totaled 152 at June 30, 2020 compared to 144 for the same period in 2019. Average full time equivalent employees totaled 154 for the six months ended June 30, 2020 compared to 141 for the same period in 2019.

Occupancy and equipment expense totaled $2.2 million for the quarter ended June 30, 2020, an increase of $0.4 million when compared to the same period in 2019. Occupancy and equipment expense totaled $4.1 million for the six months ended June 30, 2020, an increase of $0.4 million when compared to the same period in 2019. The increase in occupancy and equipment expense was primarily due to additional cleaning costs associated with precautions taken to prevent the spread of COVID-19.

BANKWELLFINANCIAL GROUP,INC.

RECONCILIATION OFGAAP TO NON-GAAPMEASURES (unaudited)

(Dollars inthousands, exceptshare data)

As of

Computation ofTangible Common June 30, March 31, December 31, June 30,Equity to 2020 2020 2019 2019Tangible Assets

Total Equity $ 170,360 $ 170,214 $ 182,397 $ 176,940

Less:

Goodwill 2,589 2,589 2,589 2,589

Other intangibles 178 196 214 251

Tangible Common $ 167,593 $ 167,429 $ 179,594 $ 174,100 Equity



Total Assets $ 2,043,635 $ 2,053,625 $ 1,882,182 $ 1,859,665

Less:

Goodwill 2,589 2,589 2,589 2,589

Other intangibles 178 196 214 251

Tangible Assets $ 2,040,868 $ 2,050,840 $ 1,879,379 $ 1,856,825



Tangible CommonEquity to 8.21 % 8.16 % 9.56 % 9.38 %Tangible Assets

As of

Computation ofTangible Book June 30, March 31, December 31, June 30,Value per Common 2020 2020 2019 2019Share

Totalshareholders' $ 170,360 $ 170,214 $ 182,397 $ 176,940 equity

Less:

Preferred stock - - - -

Commonshareholders' $ 170,360 $ 170,214 $ 182,397 $ 176,940 equity

Less:

Goodwill 2,589 2,589 2,589 2,589

Other intangibles 178 196 214 251

Tangible commonshareholders' $ 167,593 $ 167,429 $ 179,594 $ 174,100 equity

Common shares 7,887,503 7,871,419 7,868,803 7,841,103

Less:

Shares ofunvested 165,708 154,012 110,975 94,598 restricted stock

Common sharesless unvested 7,721,795 7,717,407 7,757,828 7,746,505 restricted stock

Book value per $ 22.06 $ 22.06 $ 23.51 $ 22.84 share

Less:

Effects of $ 0.36 $ 0.36 $ 0.36 $ 0.37 intangible assets



Tangible BookValue per Common $ 21.70 $ 21.69 $ 23.15 $ 22.47 Share

BANKWELL FINANCIAL GROUP, INC.

RECONCILIATION OF GAAP TO NON-GAAP MEASURES (unaudited) - Continued

(Dollars in thousands)

For the Quarter Ended For the Six Months Ended

Computation June 30, March 31, December June 30, June 30, June 30,of Efficiency 2020 2020 31, 2019 2020 2019Ratio 2019

Noninterest $ 9,722 $ 9,659 $ 9,224 $ 8,755 $ 19,381 $ 17,730 expense

Less:

Amortizationof intangible 18 18 18 19 36 38 assets

Other realestate owned 6 - - 24 6 24 expenses

Adjustednoninterest $ 9,698 $ 9,641 $ 9,206 $ 8,712 $ 19,339 $ 17,668 expense

Net interest $ 13,637 $ 13,286 $ 12,882 $ 13,595 $ 26,923 $ 27,868 income

Noninterest 577 1,072 1,048 1,336 1,649 2,644 income

Less:

Net gain onsale ofavailable for - - - 76 - 76 salesecurities

Operating $ 14,214 $ 14,358 $ 13,930 $ 14,855 $ 28,572 $ 30,436 revenue



Efficiency 68.2 % 67.1 % 66.1 % 58.6 % 67.7 % 58.0 %ratio

For the Quarter Ended For the Six Months Ended

Computationof Return on June 30, March 31, December June 30, June 30, June 30,Average 2020 2020 31, 2019 2020 2019Tangible 2019Common Equity

Net IncomeAttributable $ 1,214 $ 1,363 $ 3,472 $ 5,576 $ 2,577 $ 10,656 to CommonShareholders

Total averageshareholders' $ 173,289 $ 181,127 $ 179,312 $ 179,217 $ 177,204 $ 178,387 equity

Less:

Average 2,589 2,589 2,589 2,589 2,589 2,589 Goodwill

Average Other 190 208 226 264 199 273 intangibles

Averagetangible $ 170,510 $ 178,330 $ 176,497 $ 176,364 $ 174,416 $ 175,525 common equity



AnnualizedReturn onAverage 2.86 % 3.07 % 7.80 % 12.68 % 2.97 % 12.24 %TangibleCommon Equity

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, 2020 June 30, 2019

Yield/ Yield/ Average Interest Rate ^ Average Interest Balance (5) Balance Rate ^ (5)

Assets:

Cash and Fed $ 234,979 $ 86 0.15 % $ 92,493 $ 514 2.23 %funds sold

Securities^ 95,421 738 3.09 119,999 945 3.15 (1)

Loans:

Commercial 1,088,390 12,808 4.66 1,052,936 13,201 4.96 real estate

Residential 134,295 1,251 3.73 170,180 1,630 3.83 real estate

Construction^ 100,282 1,101 4.34 85,933 1,147 5.28 (2)

Commercial 288,605 3,297 4.52 252,814 3,558 5.57 business

Consumer 111 2 8.71 270 4 6.54

Total loans 1,611,683 18,459 4.53 1,562,133 19,540 4.95

Federal HomeLoan Bank 7,472 92 4.93 7,474 116 6.23 stock

Total earning 1,949,555 $ 19,375 3.93 % 1,782,099 $ 21,115 4.69 %assets

Other assets 129,247 85,117

Total assets $ 2,078,802 $ 1,867,216



Liabilitiesand shareholders'equity:

Interestbearing liabilities:

NOW $ 74,050 $ 31 0.17 % $ 64,316 $ 28 0.17 %

Money market 464,230 862 0.75 444,848 1,847 1.67

Savings 162,283 295 0.73 174,626 743 1.71

Time 765,103 3,622 1.90 644,723 3,701 2.30

Totalinterest 1,465,666 4,810 1.32 1,328,513 6,319 1.91 bearingdeposits

Borrowed 188,557 876 1.84 175,172 1,132 2.56 Money

Totalinterest 1,654,223 $ 5,686 1.38 % 1,503,685 $ 7,451 1.99 %bearingliabilities

Noninterestbearing 198,253 159,021 deposits

Other 53,037 25,293 liabilities

Total 1,905,513 1,687,999 liabilities

Shareholders' 173,289 179,217 equity

Totalliabilitiesand $ 2,078,802 $ 1,867,216 shareholders'equity

Net interest $ 13,689 $ 13,664 income^(3)

Interest rate 2.55 % 2.70 %spread

Net interest 2.81 % 3.07 %margin^(4)

(1) Average balances and yields for securities are based on amortized cost. (2) Includes commercial and residential real estate construction. (3) The adjustment for securities and loans taxable equivalency amounted to $52 thousand and $69 thousand for the quarters ended June 30, 2020 and 2019, respectively. (4) Annualized net interest income as a percentage of earning assets. (5) Yields are calculated using the contractual day count convention for each respective product type.

BANKWELL FINANCIAL GROUP, INC.

NET INTEREST MARGIN ANALYSIS ON A FULLY TAX EQUIVALENT BASIS - YTD (unaudited)

(Dollars in thousands)

For the Six Months Ended

June 30, 2020 June 30, 2019

Average Yield/ Average Yield/ Balance Interest Rate Balance Interest Rate ^(5) ^(5)

Assets:

Cash and Fed $ 154,321 $ 372 0.48 % $ 82,854 $ 897 2.18 %funds sold

Securities^ 96,932 1,513 3.12 118,792 1,877 3.16 (1)

Loans:

Commercial 1,098,550 25,839 4.65 1,059,247 25,586 4.80 real estate

Residential 139,059 2,607 3.75 173,353 3,333 3.85 real estate

Construction^ 100,338 2,316 4.57 83,549 2,271 5.41 (2)

Commercial 273,767 6,676 4.82 264,648 8,436 6.34 business

Consumer 133 6 8.51 296 10 6.48

Total loans 1,611,847 37,444 4.60 1,581,093 39,636 4.99

Federal HomeLoan Bank 7,401 195 5.30 7,531 253 6.72 stock

Total earning 1,870,501 $ 39,524 4.18 % 1,790,270 $ 42,663 4.74 %assets

Other assets 122,060 82,023

Total assets $ 1,992,561 $ 1,872,293



Liabilitiesand shareholders'equity:

Interestbearing liabilities:

NOW $ 70,990 $ 59 0.17 % $ 61,579 $ 75 0.25 %

Money market 451,388 2,354 1.05 458,884 3,829 1.68

Savings 173,875 967 1.12 177,482 1,512 1.72

Time 702,853 7,139 2.04 636,156 7,003 2.22

Totalinterest 1,399,106 10,519 1.51 1,334,101 12,419 1.88 bearingdeposits

Borrowed 180,575 1,977 2.17 175,343 2,235 2.54 Money

Totalinterest 1,579,681 $ 12,496 1.59 % 1,509,444 $ 14,654 1.96 %bearingliabilities

Noninterestbearing 188,722 161,239 deposits

Other 46,954 23,223 liabilities

Total 1,815,357 1,693,906 liabilities

Shareholders' 177,204 178,387 equity

Totalliabilitiesand $ 1,992,561 $ 1,872,293 shareholders'equity

Net interest $ 27,028 $ 28,009 income^(3)

Interest rate 2.59 % 2.78 %spread

Net interest 2.89 % 3.13 %margin^(4)

(1) Average balances and yields for securities are based on amortized cost. (2) Includes commercial and residential real estate construction. (3) The adjustment for securities and loans taxable equivalency amounted to $105 thousand and $141 thousand for the six months ended June 30, 2020 and 2019, respectively. (4) Annualized net interest income as a percentage of earning assets. (5) Yields are calculated using the contractual day count convention for each respective product type.

View source version on businesswire.com: https://www.businesswire.com/news/home/20200728005976/en/

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