Bankwell Financial Group Inc

To the Shareholders and the Board of Directors of Bankwell Financial Group, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Bankwell Financial Group, Inc. and its subsidiaries (the Company) as of December 31,2023 and 2022, the related consolidated statements of income, comprehensive income (loss), shareholders' equity, and cash flows for the years then ended and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31,2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31,2023, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 12, 2024, expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

Change in accounting principle

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for the recognition and measurement of credit losses in 2023 due to the adoption of Accounting Standard Codification Topic 326, Financial Instruments ‑ Credit Losses.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee of the board of directors and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses on Loans and Unfunded Commitments

As described in Notes 1 and 5 to the consolidated financial statements, the Company’s allowance for credit losses for loans totaled $27.9 million as of December 31,2023, which consists of an allowance for collectively evaluated loans of $27.0 million and an allowance for individually evaluated loans of $0.9 million. The Company’s allowance for credit losses for unfunded commitments totaled $0.9 million as of December 31,2023. Management estimates the allowance based on credit losses believed to be in the Company’s loan portfolio over the life of its loans, segmented by portfolio and risk classification, at the balance sheet date. The Company’s allowance for credit losses on loans consists of a component relating to collectively evaluated loans and a component relating to individually evaluated loans. The allowance for collectively evaluated loans is derived from lifetime loss rate models that calculate expected losses over the life of each loan based on exposure at default, loan attributes, and reasonable, supportable economic forecasts, adjusted for qualitative adjustments considered by management. The lifetime loss rate models rely upon historical losses from a broad cross section of U.S. banks and management reviews the banks included in the loss rate models that determine the loss rates. To further refine the expected losses, management selects a group of peer banks to scale the loss rate models to produce an allowance that is representative of the Company’s loan portfolio and geographic area (“peer scalar”). The allowance for credit losses on unfunded commitments is based on the same assumptions as funded loans and also considers the expected utilization of unfunded commitments.

To account for economic uncertainty, the Company incorporates multiple economic scenarios in determining the allowance for credit losses. The scenarios include various projections based on variables such as Gross Domestic Product, interest rates, property price indices, and employment measures, among others. The scenarios are probability-weighted based on available information at the time the calculation is conducted.

Management considers qualitative adjustments to expected credit loss estimates for information not already captured in the quantitative loss estimation models. The measurement of expected credit losses is influenced by the Company’s judgment of market conditions, changes in loan composition or concentrations, performance trends, regulatory changes, uncertainty in macroeconomic forecasts, or other asset specific risk characteristics.

Key assumptions used in the models include portfolio segmentation, the peer scalar, forecasted economic scenarios, qualitative adjustments, and the expected utilization of unfunded commitments, among others. Loan portfolios are segmented by loan level attributes such as loan type, size, date of origination, and delinquency status to create homogenous loan pools. Pool level metrics are calculated, and loss rates are subsequently applied to the pools as the loans have similar characteristics.

We identified the selection of the models being used in determining the loss rates, peer bank determinations for scaling, forecasted economic scenarios, qualitative adjustments, and expected utilization of unfunded commitments components of the allowance for credit losses for loans and the allowance for credit losses on unfunded loan commitments (herein referred to as “the allowance”) as a critical audit matter because auditing the underlying assumptions in those components involved a high degree of complexity and auditor judgment given the high degree of subjectivity exercised by management in developing the allowance, which resulted in an increase in audit effort and the use of an internal economic specialist due to the impact these assumptions have on the accounting estimate.

Our audit procedures related to management’s selection of the models being used in determining the loss rates, peer bank determinations for scaling, forecasted economic scenarios, qualitative adjustments, and expected utilization of unfunded commitments components of the allowance included the following, among others:

–We obtained an understanding of the relevant controls related to management’s selection of the models being used in determining the loss rates, peer bank determinations for scaling, forecasted economic scenarios, qualitative adjustments, and expected utilization of unfunded commitments components of the allowance and tested such controls for design and operating effectiveness.

–We evaluated management’s judgments and assumptions used in the development of the qualitative factors for reasonableness, and tested the reliability of the underlying data on which these factors are based, by comparing information to source documents and external information sources.

–We tested management’s process and significant judgments in the selection of the models being used in determining the loss rates, peer bank determinations for scaling, forecasted economic scenarios, and expected utilization of unfunded commitments of the allowance for credit losses, which included:

•Evaluating the reasonableness of management’s judgments related to the establishment of the models being used in determining the loss rates and expected utilization of unfunded commitments and testing thecompleteness and accuracy of data used by management in determining inputs to the models by agreeing those inputs to internal information sources.

•Evaluating management’s considerations and data utilized as a basis for the peer bank determinations for scaling used in the loss rate models and testing the completeness and accuracy of the underlying data by tracing the data to independent sources.

•Evaluating management’s considerations and selection of forecasted economic scenarios and weightings, and testing the reasonableness of the underlying data, which included Gross Domestic Product, interest rates, property price indices, and employment measures, among others, by comparing these forecasts to external and internal information sources that were available to management, which included the use of an internal economic specialist.

•We obtained and assessed the reasonableness of model validations performed by a reputable third party evaluating the statistical documentation and process used by management in validating the models established by the vendor.

/s/RSM US LLP

We have served as the Company’s auditor since 2017.

Hartford, Connecticut

March 12, 2024