Bankwell Financial Group Reports Strong Operating Results on Record Loan Growth for the Third Quarter; Declares Fourth Quarter Dividend

Rhea-AI Summary

Bankwell Financial Group (NASDAQ: BWFG) reported a GAAP net income of $9.2 million, or $1.18 per share, for Q3 2022, up from $6.9 million or $0.87 per share in Q3 2021. The quarter saw a significant loan growth of $230 million (11% increase), resulting in a 1.47% return on average assets. The Board declared a $0.20 per share cash dividend payable on November 21, 2022. However, net interest income is expected to decline by 10% in 2023 due to rising deposit costs. Fully diluted book value per share rose 3.2% quarter-over-quarter, reflecting strong growth.

Positive

• GAAP net income increased to $9.2 million in Q3 2022, up from $6.9 million in Q3 2021.
• Loan growth of $230 million signifies an 11% increase over the prior quarter.
• Return on average assets improved to 1.47%, and return on average equity rose to 15.73%.
• Fully diluted book value per share increased by 3.2% in Q3 2022.

Negative

• Net interest income is projected to decrease by 10% in 2023 due to higher deposit costs.

NEW CANAAN, Conn.--(BUSINESS WIRE)-- Bankwell Financial Group, Inc. (NASDAQ: BWFG) reported GAAP net income of $9.2 million, or $1.18 per share, for the third quarter of 2022, versus $6.9 million, or $0.87 per share, for the same period in 2021. During the quarter ended September 30, 2022 the Company experienced another quarter of elevated loan prepayments that positively impacted reported earnings. Adjusting for this, operating earnings per share totaled $1.08 for the third quarter of 2022. Please reference the table below for a reconciliation of reported earnings per share to operating earnings per share.

	Earnings Per Common Share
3Q'22 QTD Reported Diluted EPS	$	1.18
Elevated Loan Prepayments(1)		(0.10	)
3Q'22 QTD Operating EPS(2)	$	1.08
(1) 3Q'22 loan prepayments exceeded historical quarterly averages and are not reflective of run rate.
(2) Non-gaap measure.

The Company's Board of Directors declared a $0.20 per share cash dividend, payable November 21, 2022 to shareholders of record on November 11, 2022.

We recommend reading this earnings release in conjunction with the Third Quarter 2022 Investor Presentation, located at http://investor.mybankwell.com/Presentations and included as an exhibit to our October 26, 2022 Current Report on Form 8-K.

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

"The Company had another very strong quarter, growing loans by $230 million. This represents an 11% increase over the prior quarter, and a year to date increase of 21%. Profitability remains strong, with a 1.47% Return on Average Assets and a 15.73% Return on Average Equity.

"The Company’s growth in 2021 and 2022 has created an exceptionally strong foundation to grow top line Interest Income in the coming year. We anticipate Interest Income to increase by more than 25% in 2023. The current cycle of tightening by the Federal Reserve will increase our cost of deposits in the quarters ahead. Based on forward market pricing we could expect Net Interest Income to decrease by 10% in 2023 versus 2022.

"We continue to build Book Value for our shareholders. Fully Diluted Book Value per share has increased by 3.2% this quarter and by 16.2% year to date. Importantly, all credit metrics remain benign.

"We thank our employees and clients who have made our success possible, and are confident that we have a great team in place to perform in an increasingly volatile economic environment."

"The Company had another very strong quarter, growing loans by $230 million. This represents an 11% increase over the prior quarter, and a year to date increase of 21%. Profitability remains strong, with a 1.47% Return on Average Assets and a 15.73% Return on Average Equity.

"The Company’s growth in 2021 and 2022 has created an exceptionally strong foundation to grow top line Interest Income in the coming year. We anticipate Interest Income to increase by more than 25% in 2023. The current cycle of tightening by the Federal Reserve will increase our cost of deposits in the quarters ahead. Based on forward market pricing we could expect Net Interest Income to decrease by 10% in 2023 versus 2022.

"We continue to build Book Value for our shareholders. Fully Diluted Book Value per share has increased by 3.2% this quarter and by 16.2% year to date. Importantly, all credit metrics remain benign.

"We thank our employees and clients who have made our success possible, and are confident that we have a great team in place to perform in an increasingly volatile economic environment."

Third Quarter 2022 Highlights (performance metrics are impacted by certain one-time items - please refer to the table following the below highlights for adjusted performance metrics):

• Return on average assets was 1.47% and return on average equity was 15.73% for the quarter ended September 30, 2022.
• The net interest margin was 4.12% for the quarter ended September 30, 2022.
• The efficiency ratio was 44.1% for the quarter ended September 30, 2022.
• Total gross loans were $2.3 billion, growing $391.9 million, or 20.7%, compared to December 31, 2021.
• Average yield on 2022 funded loans was 5.36%.
• Investment securities totaled $113.1 million and represent 4.2% of total assets.
• Fully diluted tangible book value per share rose to $29.68 compared to $25.55 at December 31, 2021.
• The Wilton branch closed, effective October 7, 2022.
• Shares issued and outstanding were 7,711,843, reflecting repurchases of 53,546 shares of common stock at a weighted average price of $31.81 during the quarter ended September 30, 2022.
• The Company issued 6.00% fixed-to-floating rate subordinated notes due 2032 in the principal amount of $35.0 million.

		Quarter Ended September 30, 2022									Nine Months Ended September 30, 2022
Key metrics		Reported			Operating(1)			Variance			Reported			Operating(1)			Variance
Net interest margin		4.12	%		3.96	%		0.16	%		3.81	%		3.67	%		0.14	%
Efficiency ratio		44.1	%		46.0	%		(1.9	) %		45.3	%		46.9	%		(1.6	) %
Return on average assets		1.47	%		1.34	%		0.13	%		1.59	%		1.38	%		0.21	%
Return on average stockholders' equity		15.73	%		14.40	%		1.33	%		17.94	%		15.57	%		2.37	%
(1) Operating metrics are non-GAAP measures and have been adjusted for elevated loan prepayments for the quarter and nine months ended September 30, 2022, as noted in the above table. Adjustments also include the release of specific reserves and the historical loss update to the Company's peer group for the nine months ended September 30, 2022. Please reference the second quarter 2022 earnings release for more details on these adjustments.

Earnings and Performance

Revenues (net interest income plus noninterest income) for the quarter ended September 30, 2022 were $25.0 million, versus $19.2 million for the quarter ended September 30, 2021. Revenues for the nine months ended September 30, 2022 were $70.4 million, versus $53.8 million for the nine months ended September 30, 2021. The increase in revenues was primarily attributable to an increase in interest and fees on loans due to loan growth and higher overall loan yields. The increase in loan yields was aided by elevated loan prepayment fees, which totaled $1.3 million for the quarter ended September 30, 2022, compared to $0.1 million for the quarter ended September 30, 2021. The increase in revenues was partially offset by a decrease in noninterest income driven by a decrease in loans sales and the absence of rental income recognized during the quarter and nine months ended September 30, 2021, as a result of the disposition of the Company's former headquarters building. In addition, the increase in revenues for the nine months ended September 30, 2022 was muted as a result of a one-time federal payroll tax credit for COVID-19 of $0.9 million recognized in the quarter ended March 31, 2021. Finally, the increase in revenues for the quarter ended September 30, 2022 was also partially offset by an increase in interest expense on deposits, resulting from an increase in rates necessary to remain competitive in the current economic environment.

Net income for the quarter ended September 30, 2022 was $9.2 million, versus $6.9 million for the quarter ended September 30, 2021. Net income for the nine months ended September 30, 2022 was $29.4 million, versus $18.8 million for the nine months ended September 30, 2021. The increase in net income was primarily impacted by the aforementioned increases in revenues. In addition, the increase in net income was partially offset by an increase in the provision for loan losses primarily driven by loan growth and an increase in noninterest expense for the quarter and nine months ended September 30, 2022.

Basic and diluted earnings per share were $1.19 and $1.18, respectively, for the quarter ended September 30, 2022 compared to basic and diluted earnings per share of $0.88 and $0.87, respectively, for the quarter ended September 30, 2021. Basic and diluted earnings per share were $3.80 and $3.75, respectively, for the nine months ended September 30, 2022 compared to basic and diluted earnings per share of $2.38 and $2.37, respectively, for the nine months ended September 30, 2021.

The net interest margin (fully taxable equivalent basis) for the quarters ended September 30, 2022 and September 30, 2021 was 4.12% and 3.39%, respectively. The net interest margin (fully taxable equivalent basis) for the nine months ended September 30, 2022 and September 30, 2021 was 3.81% and 3.08%, respectively. The increase in the net interest margin was due to elevated loan prepayment fees and an increase in overall loan yields.

Financial Condition

Assets totaled $2.72 billion at September 30, 2022, compared to assets of $2.46 billion at December 31, 2021. The increase in assets was primarily due to loan growth and a corresponding increase in deposits and borrowings. Gross loans totaled $2.3 billion at September 30, 2022, an increase of $391.9 million compared to December 31, 2021. Deposits totaled $2.3 billion at September 30, 2022, compared to deposits of $2.1 billion at December 31, 2021.

Capital

Shareholders’ equity totaled $231.5 million as of September 30, 2022, an increase of $29.5 million compared to December 31, 2021, primarily a result of (i) net income of $29.4 million for the nine months ended September 30, 2022 and (ii) an $8.4 million favorable impact to accumulated other comprehensive income driven by fair value marks related to hedge positions involving interest rate swaps, partially offset by fair value marks on the Company's investment portfolio. The Company's interest rate swaps are used to hedge interest rate risk. The increase in Shareholders’ equity was partially offset by dividends paid of $4.7 million and common stock repurchases of $5.5 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, 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, 2022				June 30, 2022			March 31, 2022				December 31, 2021				September 30, 2021
ASSETS
Cash and due from banks	$	212,175			$	149,522		$	280,471			$	291,598			$	169,417
Federal funds sold		10,947				21,505			19,022				53,084				8,097
Cash and cash equivalents		223,122				171,027			299,493				344,682				177,514
Investment securities
Marketable equity securities, at fair value		1,973				2,126			2,090				2,168				2,185
Available for sale investment securities, at fair value		95,095				94,907			98,733				90,198				87,565
Held to maturity investment securities, at amortized cost		16,027				15,917			15,979				16,043				16,107
Total investment securities		113,095				112,950			116,802				108,409				105,857
Loans receivable (net of allowance for loan losses of $18,167, $15,773, $17,141, $16,902 and $16,803 at September 30, 2022, June 30, 2022, March 31, 2022, December 31, 2021 and September 30, 2021, respectively)		2,263,432				2,036,626			1,964,567				1,875,167				1,805,217
Accrued interest receivable		9,552				8,047			7,733				7,512				6,911
Federal Home Loan Bank stock, at cost		5,039				5,064			2,870				2,814				3,632
Premises and equipment, net		27,510				27,768			25,661				25,588				35,118
Bank-owned life insurance		49,970				49,699			49,434				49,174				48,903
Goodwill		2,589				2,589			2,589				2,589				2,589
Other intangible assets		—				—			—				—				48
Deferred income taxes, net		5,952				4,768			6,879				7,621				7,718
Other assets		22,734				17,014			20,849				32,708				33,181
Total assets	$	2,722,995			$	2,435,552		$	2,496,877			$	2,456,264			$	2,226,688
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Deposits
Noninterest bearing deposits	$	380,365			$	372,584		$	412,985			$	398,956			$	338,705
Interest bearing deposits		1,906,337				1,660,941			1,753,219				1,725,042				1,544,118
Total deposits		2,286,702				2,033,525			2,166,204				2,123,998				1,882,823
Advances from the Federal Home Loan Bank		90,000				105,000			50,000				50,000				80,000
Subordinated debentures		68,897				34,500			34,471				34,441				15,374
Accrued expenses and other liabilities		45,896				37,060			35,982				45,838				52,314
Total liabilities		2,491,495				2,210,085			2,286,657				2,254,277				2,030,511
Shareholders’ equity
Common stock, no par value		114,548				115,599			114,882				118,148				119,588
Retained earnings		117,152				109,523			99,047				92,400				85,992
Accumulated other comprehensive (loss) income		(200	)			345			(3,709	)			(8,561	)			(9,403	)
Total shareholders’ equity		231,500				225,467			210,220				201,987				196,177
Total liabilities and shareholders’ equity	$	2,722,995			$	2,435,552		$	2,496,877			$	2,456,264			$	2,226,688

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, 2022				June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021			September 30, 2022				September 30, 2021
Interest and dividend income
Interest and fees on loans	$	28,128			$	25,141			$	21,428			$	21,081			$	19,795		$	74,697			$	56,961
Interest and dividends on securities		811				774				720				722				731			2,305				2,236
Interest on cash and cash equivalents		747				449				154				90				88			1,350				286
Total interest and dividend income		29,686				26,364				22,302				21,893				20,614			78,352				59,483
Interest expense
Interest expense on deposits		4,092				1,983				2,206				2,198				2,387			8,281				8,245
Interest expense on borrowings		993				558				586				767				503			2,137				2,280
Total interest expense		5,085				2,541				2,792				2,965				2,890			10,418				10,525
Net interest income		24,601				23,823				19,510				18,928				17,724			67,934				48,958
Provision (credit) for loan losses		2,381				(1,445	)			229				125				134			1,165				(182	)
Net interest income after provision (credit) for loan losses		22,220				25,268				19,281				18,803				17,590			66,769				49,140
Noninterest income
Bank owned life insurance		271				265				260				270				271			796				753
Service charges and fees		240				249				240				257				199			729				615
(Losses) gains and fees from sales of loans		(15	)			608				631				441				924			1,224				2,251
Other		(94	)			30				(173	)			(143	)			43			(237	)			1,213
Total noninterest income		402				1,152				958				825				1,437			2,512				4,832
Noninterest expense
Salaries and employee benefits		5,876				5,433				4,940				4,806				4,782			16,249				13,511
Occupancy and equipment		2,035				2,193				2,150				2,411				2,615			6,378				8,271
Professional services		994				1,000				981				628				498			2,975				1,632
Data processing		626				689				654				432				632			1,969				1,977
Director fees		325				339				352				335				324			1,016				968
FDIC insurance		255				262				223				231				298			740				1,001
Marketing		102				107				45				87				186			254				317
Other		818				913				580				749				1,035			2,311				2,383
Total noninterest expense		11,031				10,936				9,925				9,679				10,370			31,892				30,060
Income before income tax expense		11,591				15,484				10,314				9,949				8,657			37,389				23,912
Income tax expense		2,417				3,462				2,102				2,135				1,802			7,981				5,140
Net income	$	9,174			$	12,022			$	8,212			$	7,814			$	6,855		$	29,408			$	18,772
Earnings Per Common Share:
Basic	$	1.19			$	1.56			$	1.05			$	1.00			$	0.88		$	3.80			$	2.38
Diluted	$	1.18			$	1.55			$	1.04			$	0.99			$	0.87		$	3.75			$	2.37
Weighted Average Common Shares Outstanding:
Basic		7,553,718				7,556,645				7,637,077				7,660,307				7,677,822			7,582,175				7,721,943
Diluted		7,612,421				7,614,243				7,719,405				7,726,420				7,738,758			7,664,123				7,779,632
Dividends per common share	$	0.20			$	0.20			$	0.20			$	0.18			$	0.18		$	0.60			$	0.46

BANKWELL FINANCIAL GROUP, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited)
	For the Quarter Ended															For the Nine Months
	September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021			September 30, 2022			September 30, 2021
Performance ratios:
Return on average assets	1.47	%		1.96	%		1.35	%		1.32	%		1.22	%		1.59	%		1.12	%
Return on average shareholders' equity	15.73	%		22.09	%		16.05	%		15.44	%		14.09	%		17.94	%		13.29	%
Return on average tangible common equity	15.91	%		22.36	%		16.25	%		15.65	%		14.29	%		18.16	%		13.48	%
Net interest margin	4.12	%		4.01	%		3.30	%		3.43	%		3.39	%		3.81	%		3.08	%
Efficiency ratio(1)	44.1	%		43.8	%		48.5	%		48.8	%		54.1	%		45.3	%		55.8	%
Net loan charge-offs as a % of average loans	—	%		—	%		—	%		—	%		—	%		—	%		0.24	%
Dividend payout ratio(2)	16.95	%		12.90	%		19.23	%		18.18	%		20.69	%		16.00	%		19.41	%

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

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

	As of
	September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021
Capital ratios:
Total Common Equity Tier 1 Capital to Risk-Weighted Assets(1)		11.42	%			11.10	%			11.20	%			11.18	%			10.59	%
Total Capital to Risk-Weighted Assets(1)		12.16	%			11.80	%			12.00	%			12.00	%			11.44	%
Tier I Capital to Risk-Weighted Assets(1)		11.42	%			11.10	%			11.20	%			11.18	%			10.59	%
Tier I Capital to Average Assets(1)		11.31	%			10.15	%			9.80	%			9.94	%			9.61	%
Tangible common equity to tangible assets		8.41	%			9.16	%			8.32	%			8.13	%			8.70	%
Fully diluted tangible book value per common share	$	29.68			$	28.75			$	26.75			$	25.55			$	24.68

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

BANKWELL FINANCIAL GROUP, INC. ASSET QUALITY (unaudited) (Dollars in thousands)
	For the Quarter Ended
	September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021
Allowance for loan losses:
Balance at beginning of period	$	15,773			$	17,141			$	16,902			$	16,803			$	16,672
Charge-offs:
Commercial business		—				—				—				(26	)			—
Consumer		(8	)			—				(4	)			(5	)			(15	)
Total charge-offs		(8	)			—				(4	)			(31	)			(15	)
Recoveries:
Commercial real estate		—				77				—				—				—
Commercial business		21				—				13				2				11
Consumer		—				—				1				3				1
Total recoveries		21				77				14				5				12
Net loan recoveries (charge-offs)		13				77				10				(26	)			(3	)
Provision (Credit) for loan losses		2,381				(1,445	)			229				125				134
Balance at end of period	$	18,167			$	15,773			$	17,141			$	16,902			$	16,803

	As of
	September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021
Asset quality:
Nonaccrual loans
Residential real estate	$	2,137			$	2,161			$	2,181			$	2,380			$	1,849
Commercial real estate		2,894				2,955				3,365				3,482				16,314
Commercial business		2,380				787				817				1,728				1,754
Construction		9,382				9,382				9,382				8,997				8,997
Total nonaccrual loans		16,793				15,285				15,745				16,587				28,914
Other real estate owned		—				—				—				—				—
Total nonperforming assets	$	16,793			$	15,285			$	15,745			$	16,587			$	28,914
Nonperforming loans as a % of total loans		0.73	%			0.74	%			0.79	%			0.88	%			1.58	%
Nonperforming assets as a % of total assets		0.62	%			0.63	%			0.63	%			0.68	%			1.30	%
Allowance for loan losses as a % of total loans		0.79	%			0.77	%			0.86	%			0.89	%			0.92	%
Allowance for loan losses as a % of nonperforming loans		108.18	%			103.19	%			108.87	%			101.90	%			58.11	%
Total past due loans to total loans		0.78	%			1.40	%			0.85	%			1.72	%			1.69	%

Total nonaccrual loans increased $0.2 million to $16.8 million as of September 30, 2022 when compared to December 31, 2021. Nonperforming assets as a percentage of total assets decreased to 0.62% at September 30, 2022, down from 0.68% at December 31, 2021. The allowance for loan losses at September 30, 2022 was $18.2 million, representing 0.79% of total loans.

Past due loans decreased to $17.8 million, or 0.78% of total loans, as of September 30, 2022, compared to $32.6 million, or 1.72% of total loans, as of December 31, 2021.

BANKWELL FINANCIAL GROUP, INC. LOAN & DEPOSIT PORTFOLIO (unaudited) (Dollars in thousands)
Period End Loan Composition	September 30, 2022			June 30, 2022			December 31, 2021			Current QTD % Change			YTD % Change
Residential Real Estate	$	61,664		$	64,253		$	79,987		(4.0	) %		(22.9	) %
Commercial Real Estate(1)		1,647,928			1,499,364			1,356,709		9.9			21.5
Construction		117,355			111,422			98,341		5.3			19.3
Total Real Estate Loans		1,826,947			1,675,039			1,535,037		9.1			19.0
Commercial Business		443,288			372,361			350,975		19.0			26.3
Consumer		16,558			9,196			8,869		80.1			86.7
Total Loans	$	2,286,793		$	2,056,596		$	1,894,881		11.2	%		20.7	%
(1) Includes owner occupied commercial real estate.

Gross loans totaled $2.3 billion at September 30, 2022, an increase of $391.9 million compared to December 31, 2021.

Period End Deposit Composition	September 30, 2022			June 30, 2022			December 31, 2021			Current QTD % Change			YTD % Change
Noninterest bearing demand	$	380,365		$	372,584		$	398,956		2.1	%		(4.7	) %
NOW		115,200			155,026			119,479		(25.7	)		(3.6	)
Money Market		836,564			833,730			954,674		0.3			(12.4	)
Savings		183,576			196,075			193,631		(6.4	)		(5.2	)
Time		770,997			476,110			457,258		61.9			68.6
Total Deposits	$	2,286,702		$	2,033,525		$	2,123,998		12.5	%		7.7	%

Total deposits were $2.3 billion at September 30, 2022, compared to $2.1 billion at December 31, 2021, an increase of $162.7 million, or 7.7%. The increase in deposits is primarily a result of an increase in brokered time deposits to fund the significant loan growth during the third quarter of 2022, increasing $338.1 million compared to December 31, 2021.

BANKWELL FINANCIAL GROUP, INC. NONINTEREST INCOME (unaudited) (Dollars in thousands)
	For the Quarter Ended
Noninterest income	September 30, 2022				June 30, 2022			September 30, 2021			Sep 22 vs. June 22 % Change			Sep 22 vs. Sep 21 % Change
Bank owned life insurance	$	271			$	265		$	271		2.3	%		—	%
Service charges and fees		240				249			199		(3.6	)		20.6
(Losses) gains and fees from sales of loans		(15	)			608			924		(102.5	)		(101.6	)
Other		(94	)			30			43		(413.3	)		(318.6	)
Total noninterest income	$	402			$	1,152		$	1,437		(65.1	) %		(72.0	) %

	For the Nine Months Ended
Noninterest income	September 30, 2022				September 30, 2021			% Change
Gains and fees from sales of loans	$	1,224			$	2,251		(45.6	) %
Bank owned life insurance		796				753		5.7
Service charges and fees		729				615		18.5
Other		(237	)			1,213		(119.5	)
Total noninterest income	$	2,512			$	4,832		(48.0	) %

Noninterest income decreased by $1.0 million to $0.4 million for the quarter ended September 30, 2022 compared to the quarter ended September 30, 2021. Noninterest income decreased by $2.3 million to $2.5 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

The decrease in noninterest income was driven by a reduction in loan sales for the quarter and nine months ended September 30, 2022 when compared to the same periods in 2021. Loan sales decreased $0.9 million and $1.0 million for the quarter and nine months ended September 30, 2022, respectively. In addition, noninterest income declined due to the absence of rental income recognized during the quarter and nine months ended September 30, 2021, as a result of the disposition of the Company's former headquarters building. Noninterest income also declined for the nine months ended September 30, 2022 due to a one-time federal payroll tax credit for COVID-19 of $0.9 million recognized in the quarter ended March 31, 2021.

BANKWELL FINANCIAL GROUP, INC. NONINTEREST EXPENSE (unaudited) (Dollars in thousands)
	For the Quarter Ended
Noninterest expense	September 30, 2022			June 30, 2022			September 30, 2021			Sep 22 vs. June 22 % Change			Sep 22 vs. Sep 21 % Change
Salaries and employee benefits	$	5,876		$	5,433		$	4,782		8.2	%		22.9	%
Occupancy and equipment		2,035			2,193			2,615		(7.2	)		(22.2	)
Professional services		994			1,000			498		(0.6	)		99.6
Data processing		626			689			632		(9.1	)		(0.9	)
Director fees		325			339			324		(4.1	)		0.3
FDIC insurance		255			262			298		(2.7	)		(14.4	)
Marketing		102			107			186		(4.7	)		(45.2	)
Other		818			913			1,035		(10.4	)		(21.0	)
Total noninterest expense	$	11,031		$	10,936		$	10,370		0.9	%		6.4	%

	For the Nine Months Ended
Noninterest expense	September 30, 2022			September 30, 2021			% Change
Salaries and employee benefits	$	16,249		$	13,511		20.3	%
Occupancy and equipment		6,378			8,271		(22.9	)
Professional services		2,975			1,632		82.3
Data processing		1,969			1,977		(0.4	)
Director fees		1,016			968		5.0
FDIC insurance		740			1,001		(26.1	)
Marketing		254			317		(19.9	)
Other		2,311			2,383		(3.0	)
Total noninterest expense	$	31,892		$	30,060		6.1	%

Noninterest expense increased by $0.7 million to $11.0 million for the quarter ended September 30, 2022 compared to the quarter ended September 30, 2021. Noninterest expense increased by $1.8 million to $31.9 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increase in noninterest expense was primarily driven by an increase in salaries and employee benefits expense and professional services expense, partially offset by a decrease in occupancy and equipment expense.

Salaries and employee benefits expense totaled $5.9 million for the quarter ended September 30, 2022, an increase of $1.1 million when compared to the same period in 2021. Salaries and employee benefits expense totaled $16.2 million for the nine months ended September 30, 2022, an increase of $2.7 million when compared to the same period in 2021. The increase in salaries and employee benefits expense was driven by an increase in full time equivalent employees, as well as an increase in variable compensation as a result of the Bank's overall growth and improved performance. Full time equivalent employees totaled 140 at September 30, 2022 compared to 134 for the same period in 2021. Average full time equivalent employees totaled 131 for the nine months ended September 30, 2022 compared to 127 for the same period in 2021. The increase in salaries and employee benefits expense was partially offset by higher loan originations, which enabled the bank to defer a greater amount of expenses.

Professional services expense totaled $1.0 million for the quarter ended September 30, 2022, an increase of $0.5 million when compared to the same period in 2021. Professional services expense totaled $3.0 million for the nine months ended September 30, 2022, an increase of $1.3 million when compared to the same period in 2021. The increase in professional services expense was primarily driven by consulting fees associated with various projects, including our core system conversion.

Occupancy and equipment expense totaled $2.0 million for the quarter ended September 30, 2022, a decrease of $0.6 million when compared to the same period in 2021. Occupancy and equipment expense totaled $6.4 million for the nine months ended September 30, 2022, a decrease of $1.9 million when compared to the same period in 2021. The decrease in occupancy and equipment expense was primarily driven by the curtailment of additional cleaning costs associated with precautions taken to prevent the spread of COVID-19 during the nine months ended September 30, 2021. In addition, the decrease in occupancy and equipment expense was impacted by a reduction in lease expense as a result of the branch closure in New Canaan, which occurred during the third quarter of 2021.

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, 2022				June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021
Total Equity	$	231,500			$	225,467			$	210,220			$	201,987			$	196,177
Less:
Goodwill		2,589				2,589				2,589				2,589				2,589
Other intangibles		—				—				—				—				58
Tangible Common Equity	$	228,911			$	222,878			$	207,631			$	199,398			$	193,530
Total Assets	$	2,722,995			$	2,435,552			$	2,496,877			$	2,456,264			$	2,226,688
Less:
Goodwill		2,589				2,589				2,589				2,589				2,589
Other intangibles		—				—				—				—				58
Tangible Assets	$	2,720,406			$	2,432,963			$	2,494,288			$	2,453,675			$	2,224,041
Tangible Common Equity to Tangible Assets		8.41	%			9.16	%			8.32	%			8.13	%			8.70	%

	As of
Computation of Fully Diluted Tangible Book Value per Common Share	September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021
Total shareholders' equity	$	231,500		$	225,467		$	210,220		$	201,987		$	196,177
Less:
Preferred stock		—			—			—			—			—
Common shareholders' equity	$	231,500		$	225,467		$	210,220		$	201,987		$	196,177
Less:
Goodwill		2,589			2,589			2,589			2,589			2,589
Other intangibles		—			—			—			—			48
Tangible common shareholders' equity	$	228,911		$	222,878		$	207,631		$	199,398		$	193,540
Common shares issued and outstanding		7,711,843			7,752,389			7,761,338			7,803,166			7,842,824
Fully Diluted Tangible Book Value per Common Share	$	29.68		$	28.75		$	26.75		$	25.55		$	24.68

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, 2022				June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021				September 30, 2022				September 30, 2021
Noninterest expense	$	11,031			$	10,936			$	9,925			$	9,679			$	10,370			$	31,892			$	30,060
Less:
Amortization of intangible assets		—				—				—				48				9				—				28
Other real estate owned expenses		—				—				—				—				—				—				—
Adjusted noninterest expense	$	11,031			$	10,936			$	9,925			$	9,631			$	10,361			$	31,892			$	30,032
Net interest income	$	24,601			$	23,823			$	19,510			$	18,928			$	17,724			$	67,934			$	48,958
Noninterest income		402				1,152				958				825				1,437				2,512				4,832
Less:
Net gain on sale of available for sale securities		—				—				—				—				—				—				—
Gain on sale of other real estate owned, net		—				—				—				—				—				—				—
Operating revenue	$	25,003			$	24,975			$	20,468			$	19,753			$	19,161			$	70,446			$	53,790
Efficiency ratio		44.1	%			43.8	%			48.5	%			48.8	%			54.1	%			45.3	%			55.8	%

	For the Quarter Ended																				For the Nine Months Ended
Computation of Return on Average Tangible Common Equity	September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021				September 30, 2022				September 30, 2021
Net Income Attributable to Common Shareholders	$	9,174			$	12,022			$	8,212			$	7,814			$	6,855			$	29,408			$	18,772
Total average shareholders' equity	$	231,378			$	218,250			$	207,541			$	200,752			$	192,993			$	219,138			$	188,794
Less:
Average Goodwill		2,589				2,589				2,589				2,589				2,589				2,589				2,589
Average Other intangibles		—				—				—				45				54				—				64
Average tangible common equity	$	228,789			$	215,661			$	204,952			$	198,118			$	190,350			$	216,549			$	186,141
Annualized Return on Average Tangible Common Equity		15.91	%			22.36	%			16.25	%			15.65	%			14.29	%			18.16	%			13.48	%

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, 2022									September 30, 2021
	Average Balance			Interest			Yield/ Rate (4)			Average Balance			Interest			Yield/ Rate (4)
Assets:
Cash and Fed funds sold	$	130,440		$	747		2.27	%		$	209,500		$	88		0.17	%
Securities(1)		120,092			829		2.76				105,030			766		2.92
Loans:
Commercial real estate		1,512,381			18,830		4.87				1,270,375			14,345		4.42
Residential real estate		62,915			586		3.72				95,100			809		3.40
Construction		116,256			1,512		5.09				88,728			845		3.73
Commercial business		431,917			7,058		6.39				314,484			3,707		4.61
Consumer		12,145			142		4.65				8,870			89		3.99
Total loans		2,135,614			28,128		5.15				1,777,557			19,795		4.36
Federal Home Loan Bank stock		5,021			31		2.51				3,133			16		2.04
Total earning assets		2,391,167		$	29,735		4.87	%			2,095,220		$	20,665		3.86	%
Other assets		89,173									131,670
Total assets	$	2,480,340								$	2,226,890
Liabilities and shareholders' equity:
Interest bearing liabilities:
NOW	$	119,593		$	52		0.17	%		$	111,813		$	51		0.18	%
Money market		828,541			2,346		1.12				824,203			1,053		0.51
Savings		189,279			474		0.99				182,848			96		0.21
Time		557,243			1,220		0.87				448,218			1,187		1.05
Total interest bearing deposits		1,694,656			4,092		0.96				1,567,082			2,387		0.60
Borrowed Money		135,221			993		2.87				72,960			503		2.70
Total interest bearing liabilities		1,829,877		$	5,085		1.10	%			1,640,042		$	2,890		0.70	%
Noninterest bearing deposits		383,048									341,303
Other liabilities		36,037									52,552
Total liabilities		2,248,962									2,033,897
Shareholders' equity		231,378									192,993
Total liabilities and shareholders' equity	$	2,480,340								$	2,226,890
Net interest income(2)				$	24,650								$	17,775
Interest rate spread							3.77	%								3.16	%
Net interest margin(3)							4.12	%								3.39	%

(1) Average balances and yields for securities are based on amortized cost.
(2) The adjustment for securities and loans taxable equivalency amounted to $49 thousand and $51 thousand for the quarters ended September 30, 2022 and 2021, 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, 2022									September 30, 2021
	Average Balance			Interest			Yield/ Rate (4)			Average Balance			Interest			Yield/ Rate (4)
Assets:
Cash and Fed funds sold	$	240,252		$	1,350		0.75	%		$	315,102		$	286		0.12	%
Securities(1)		117,008			2,392		2.73				103,192			2,315		2.99
Loans:
Commercial real estate		1,433,642			51,104		4.70				1,188,049			40,802		4.53
Residential real estate		67,705			1,810		3.56				104,320			2,669		3.41
Construction		108,249			4,482		5.46				97,828			2,769		3.73
Commercial business		402,876			17,011		5.57				302,019			10,495		4.58
Consumer		7,844			290		4.94				7,601			226		3.97
Total loans		2,020,316			74,697		4.88				1,699,817			56,961		4.42
Federal Home Loan Bank stock		3,715			61		2.19				4,608			72		2.09
Total earning assets		2,381,291		$	78,500		4.35	%			2,122,719		$	59,634		3.70	%
Other assets		89,747									119,098
Total assets	$	2,471,038								$	2,241,817
Liabilities and shareholders' equity:
Interest bearing liabilities:
NOW	$	122,792		$	158		0.17	%		$	110,637		$	148		0.18	%
Money market		909,106			4,672		0.69				781,178			2,944		0.50
Savings		194,013			678		0.47				170,749			313		0.24
Time		487,792			2,773		0.76				532,278			4,840		1.22
Total interest bearing deposits		1,713,703			8,281		0.65				1,594,842			8,245		0.69
Borrowed Money		101,685			2,137		2.77				108,737			2,280		2.77
Total interest bearing liabilities		1,815,388		$	10,418		0.77	%			1,703,579		$	10,525		0.83	%
Noninterest bearing deposits		398,728									303,421
Other liabilities		37,784									46,023
Total liabilities		2,251,900									2,053,023
Shareholders' equity		219,138									188,794
Total liabilities and shareholders' equity	$	2,471,038								$	2,241,817
Net interest income(2)				$	68,082								$	49,109
Interest rate spread							3.58	%								2.87	%
Net interest margin(3)							3.81	%								3.08	%

(1) Average balances and yields for securities are based on amortized cost.
(2) The adjustment for securities and loans taxable equivalency amounted to $148 thousand and $151 thousand for the nine months ended September 30, 2022 and 2021, 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/20221026005991/en/

Christopher R. Gruseke, President and Chief Executive Officer

or

Penko Ivanov, Executive Vice President and Chief Financial Officer

Bankwell Financial Group

(203) 652-0166

Source: Bankwell Financial Group, Inc

FAQ

What is the net income for Bankwell Financial Group for Q3 2022 (BWFG)?

Bankwell Financial Group reported a net income of $9.2 million for Q3 2022.

What is the declared cash dividend for BWFG and its payment date?

Bankwell Financial Group declared a cash dividend of $0.20 per share, payable on November 21, 2022.

How much did Bankwell Financial Group's loans grow in Q3 2022?

Bankwell Financial Group's loans grew by $230 million in Q3 2022.

What is the expected change in net interest income for BWFG in 2023?

Net interest income for Bankwell Financial Group is expected to decrease by 10% in 2023.