Bankwell Financial Group Reports Operating Results for the Fourth Quarter and Declares an Increase to the First Quarter Dividend

About this update from Bankwell Financial Group, Inc.

NEW CANAAN, Conn. --(BUSINESS WIRE)-- Bankwell Financial Group, Inc. (NASDAQ: BWFG) reported GAAP net income of $3.5 million or $0.44 per share for the fourth quarter of 2019, versus $3.3 million or $0.41 per share for the same period in 2018 and GAAP net income of $18.2 million or $2.31 per share for the year ended 2019, versus $17.4 million or $2.21 per share for the year ended 2018. The Company's Board of Directors declared a $0.14 per share cash dividend, payable February 24, 2020 to shareholders of record on February 14, 2020 , representing an 8% increase when compared to the prior quarter’s dividend. Notes Bankwell Financial Group President and CEO, Christopher R. Gruseke : "We finished the year with excellent momentum, growing loan balances $40 million during the fourth quarter on originations of $92 million . We are particularly pleased at the results of our investment in Bankwell’s Treasury Management (“TM”) business. New non-interest bearing deposits from TM grew by 31% during 2019. Importantly, we begin 2020 with our cost of deposits down approximately 20 basis points from the peak in Q2, and expect a further 10-15 basis point reduction this year based on currently prevailing interest rates." Fourth Quarter and Year Ended 2019 Highlights: Fourth quarter diluted earnings per share were $0.44 , an increase of 7% compared to the fourth quarter of 2018. Total gross loans were $1.6 billion at December 31, 2019 and grew at an annualized rate of 10% during the quarter. Return on average assets for the year ended December 31, 2019 totaled 0.97% compared to 0.94% for the same period in 2018. Total deposits were $1.5 billion at December 31, 2019 and grew at an annualized rate of 6% during the quarter. Noninterest bearing deposits totaled $191.5 million for the year ended December 31, 2019 , up 7% when compared to the third quarter of 2019. The allowance for loan losses was $13.5 million and represents 0.84% of total loans. Investment securities totaled $100.9 million and represent 5% of total assets. Total noninterest income was $5.2 million for the year ended December 31, 2019 , or 9% of total revenue. The tangible common equity ratio and tangible book value per share, as of December 31, 2019 , were 9.56% and $23.15 , respectively. The efficiency ratio was 60.2% for the year ended December 31, 2019 . Tax equivalent net interest margin was 3.03% for the year ended December 31, 2019 . Earnings and Performance Revenues (net interest income plus noninterest income) for the quarter ended December 31, 2019 were $13.9 million , versus $15.1 million for the quarter ended December 31, 2018 . The decrease in revenues was attributable to a decline in fee income from loan prepayment activity during the quarter ended December 31, 2019 when compared to the same period in 2018. The decrease in revenues was partially offset by an increase in gains and fees from the sales of loans. Revenues for the year ended December 31, 2019 were $59.0 million , versus $60.2 million for the year ended December 31, 2018 . The decrease in revenues was primarily due to an increase in the cost of interest bearing deposits when compared to the same period in 2018. The decrease in revenues was partially offset by fees recognized from elevated loan prepayments, an increase in gains and fees from the sales of loans, and an increase in fees associated with loan related interest rate swaps. Loan prepayment fees totaled $2.7 million for the year ended December 31, 2019 compared to $1.3 million for the same period in 2018. Net income for the quarter ended December 31, 2019 was $3.5 million , versus $3.3 million for the quarter ended December 31, 2018 . Net income for the year ended December 31, 2019 was $18.2 million , versus $17.4 million for the year ended December 31, 2018 . The increase in net income was largely driven by a decline in loan charge-offs in 2019 when compared to 2018, resulting in a lower loan loss provision. Basic and diluted earnings per share were each $0.44 for the quarter ended December 31, 2019 compared to basic and diluted earnings per share of $0.42 and $0.41 , respectively, for the quarter ended December 31, 2018 . Basic and diluted earnings per share were $2.32 and $2.31 , respectively, for the year ended December 31, 2019 compared to basic and diluted earnings per share of $2.23 and $2.21 , respectively, for the year ended December 31, 2018 . The Company’s efficiency ratio for the quarters ended December 31, 2019 and December 31, 2018 was 66.1% and 58.2%, respectively. The Company's efficiency ratio for the years ended December 31, 2019 and December 31, 2018 was 60.2% and 59.2%, respectively. The increases in the efficiency ratio were primarily a result of decreased revenues when compared to the quarter and year ended December 31, 2018 . Additionally, increased noninterest expense for the quarter ended December 31, 2019 when compared to the same period in 2018 also contributed to an increase in the quarter end efficiency ratio. The net interest margin (fully taxable equivalent basis) for the quarters ended December 31, 2019 and 2018 was 2.92% and 3.20%, respectively. The net interest margin for the years ended December 31, 2019 and 2018 was 3.03% and 3.18%, respectively. The decrease in the net interest margin for the quarter ended December 31, 2019 compared to the same period in 2018 was due to a decline in fee income from loan prepayment activity. The decrease in the net interest margin for the year ended December 31, 2019 compared to the same period in 2018 was due to higher rates on interest bearing deposits. For the year ended December 31, 2019 , the decline in the net interest margin was partially offset by incremental fees from loan prepayments. Financial Condition Total assets, gross loans and deposits remained relatively flat for the period ended December 31, 2019 when compared to the same period in 2018, totaling $1.9 billion , $1.6 billion and $1.5 billion , respectively. However, gross loans grew at an annualized rate of 10% during the fourth quarter of 2019 when compared to the third quarter of 2019. In addition, deposits grew at an annualized rate of 6% during the fourth quarter of 2019 when compared to the third quarter of 2019, which includes strong growth in noninterest bearing deposits. Capital Shareholders’ equity totaled $182.4 million as of December 31, 2019 , an increase of $8.2 million compared to December 31, 2018 , primarily a result of net income for the year ended December 31, 2019 of $18.2 million . The increase was partially offset by a $6.5 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 $4.1 million and common stock repurchases of $1.0 million . The marks on the interest rate swaps are driven by lower long term market interest rates in 2019 when compared to 2018. The Company's interest rate swaps are primarily used to hedge interest rate risk in relation to its funding sources. The Company's current derivative 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 December 31, 2019 , the tangible common equity ratio and tangible book value per share were 9.56% and $23.15 , 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 increased competitive pressures, changes in the interest rate environment, general economic conditions or conditions within the securities markets, and legislative and regulatory changes that could adversely affect the business in which the Company and its subsidiaries are engaged. Non-GAAP Financial Measures In addition to evaluating the Company's financial performance in accordance with U.S. generally accepted accounting principles ("GAAP"), management may evaluate certain non-GAAP financial measures, such as the efficiency ratio. A computation and reconciliation of certain non-GAAP financial measures used for these purposes is contained in the accompanying Reconciliation of GAAP to Non-GAAP Measures tables. We believe that providing certain non-GAAP financial measures provides investors with information useful in understanding our financial performance, our performance trends and financial position. For example, the Company believes that the efficiency ratio is useful in the assessment of financial performance, including noninterest expense control. The Company believes that tangible common equity 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. BANKWELL FINANCIAL GROUP, INC. CONSOLIDATED BALANCE SHEETS (unaudited) (Dollars in thousands) December 31 , 2019 September 30 , 2019 June 30 , 2019 March 31 , 2019 December 31 , 2018 ASSETS Cash and due from banks $ 78,051 $ 83,109 $ 75,647 $ 88,827 $ 75,411 Federal funds sold — — 3,237 4,764 2,701 Cash and cash equivalents 78,051 83,109 78,884 93,591 78,112 Investment securities Marketable equity securities, at fair value 2,118 2,120 2,090 2,049 2,009 Available for sale investment securities, at fair value 82,439 86,017 93,017 96,423 93,154 Held to maturity investment securities, at amortized cost 16,308 17,365 21,318 21,364 21,421 Total investment securities 100,865 105,502 116,425 119,836 116,584 Loans receivable (net of allowance for loan losses of $13,509 , $13,212 , $13,890 , $15,430 , and $15,462 at December 31, 2019 , September 30, 2019 , June 30, 2019 , March 31, 2019 , and December 31, 2018 , respectively) 1,588,840 1,548,988 1,551,620 1,578,609 1,586,775 Other real estate owned — — 1,217 — — Accrued interest receivable 5,959 5,916 6,165 6,534 6,375 Federal Home Loan Bank stock, at cost 7,475 7,475 7,475 7,475 8,110 Premises and equipment, net 28,522 28,892 29,060 29,629 19,771 Bank-owned life insurance 41,683 41,433 41,178 40,925 40,675 Goodwill 2,589 2,589 2,589 2,589 2,589 Other intangible assets 214 232 251 270 290 Deferred income taxes, net 5,788 6,591 5,596 4,835 4,347 Other assets 22,196 27,815 19,205 13,465 10,037 Total assets $ 1,882,182 $ 1,858,542 $ 1,859,665 $ 1,897,758 $ 1,873,665 LIABILITIES AND SHAREHOLDERS’ EQUITY Liabilities Deposits Noninterest bearing deposits $ 191,518 $ 178,733 $ 161,704 $ 161,844 $ 173,198 Interest bearing deposits 1,300,385 1,291,551 1,316,027 1,359,521 1,329,046 Total deposits 1,491,903 1,470,284 1,477,731 1,521,365 1,502,244 Advances from the Federal Home Loan Bank 150,000 150,000 150,000 150,000 160,000 Subordinated debentures 25,207 25,194 25,181 25,168 25,155 Accrued expenses and other liabilities 32,675 37,052 29,813 24,384 12,070 Total liabilities 1,699,785 1,682,530 1,682,725 1,720,917 1,699,469 Shareholders’ equity Common stock, no par value 120,589 120,343 120,064 120,750 120,527 Retained earnings 69,324 66,870 63,801 59,247 54,706 Accumulated other comprehensive loss (7,516 ) (11,201 ) (6,925 ) (3,156 ) (1,037 ) Total shareholders’ equity 182,397 176,012 176,940 176,841 174,196 Total liabilities and shareholders’ equity $ 1,882,182 $ 1,858,542 $ 1,859,665 $ 1,897,758 $ 1,873,665 BANKWELL FINANCIAL GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME (unaudited) (Dollars in thousands, except share data) For the Quarter Ended For the Year Ended December 31 , 2019 September 30 , 2019 June 30 , 2019 March 31 , 2019 December 31 , 2018 December 31 , 2019 December 31 , 2018 Interest and dividend income Interest and fees on loans $ 18,648 $ 19,055 $ 19,540 $ 20,096 $ 20,030 $ 77,339 $ 74,715 Interest and dividends on securities 858 903 992 997 1,009 3,750 3,921 Interest on cash and cash equivalents 427 535 514 383 504 1,859 1,428 Total interest and dividend income 19,933 20,493 21,046 21,476 21,543 82,948 80,064 Interest expense Interest expense on deposits 5,948 6,331 6,319 6,100 5,942 24,698 18,951 Interest expense on borrowings 1,103 1,151 1,132 1,103 1,134 4,489 4,787 Total interest expense 7,051 7,482 7,451 7,203 7,076 29,187 23,738 Net interest income 12,882 13,011 13,595 14,273 14,467 53,761 56,326 Provision (Credit) for loan losses 310 773 (841 ) 195 2,795 437 3,440 Net interest income after provision (credit) for loan losses 12,572 12,238 14,436 14,078 11,672 53,324 52,886 Noninterest income Gains and fees from sales of loans 382 703 617 89 149 1,791 984 Bank owned life insurance 250 255 254 249 262 1,008 1,057 Service charges and fees 247 264 263 249 284 1,023 1,090 Net gain on sale of available for sale securities — — 76 — — 76 222 Loss on sale of other real estate owned, net — (102 ) — — — (102 ) — Other 169 432 126 721 (94 ) 1,448 547 Total noninterest income 1,048 1,552 1,336 1,308 601 5,244 3,900 Noninterest expense Salaries and employee benefits 5,162 4,881 4,555 4,836 4,503 19,434 18,973 Occupancy and equipment 1,928 1,946 1,833 1,887 1,671 7,594 6,790 Data processing 499 505 551 512 487 2,067 2,033 Professional services 402 346 519 590 583 1,857 2,103 Director fees 224 235 215 189 295 863 1,044 Marketing 220 210 348 193 416 971 1,587 Amortization of intangibles 18 19 19 19 20 75 92 FDIC insurance — (125 ) 76 123 159 74 779 Other 771 655 639 626 662 2,691 2,232 Total noninterest expense 9,224 8,672 8,755 8,975 8,796 35,626 35,633 Income before income tax expense 4,396 5,118 7,017 6,411 3,477 22,942 21,153 Income tax expense 924 1,030 1,441 1,331 216 4,726 3,720 Net income $ 3,472 $ 4,088 $ 5,576 $ 5,080 $ 3,261 $ 18,216 $ 17,433 Earnings Per Common Share: Basic $ 0.44 $ 0.52 $ 0.71 $ 0.65 $ 0.42 $ 2.32 $ 2.23 Diluted $ 0.44 $ 0.52 $ 0.71 $ 0.65 $ 0.41 $ 2.31 $ 2.21 Weighted Average Common Shares Outstanding: Basic 7,745,227 7,750,490 7,773,466 7,760,460 7,749,616 7,757,355 7,722,175 Diluted 7,773,780 7,766,485 7,790,760 7,776,378 7,781,153 7,784,631 7,775,480 Dividends per common share $ 0.13 $ 0.13 $ 0.13 $ 0.13 $ 0.12 $ 0.52 $ 0.48 BANKWELL FINANCIAL GROUP, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited) For the Quarter Ended For the Year Ended December 31 , 2019 September 30 , 2019 June 30 , 2019 March 31 , 2019 December 31 , 2018 December 31 , 2019 December 31 , 2018 Performance ratios: Return on average assets 0.73 % 0.87 % 1.20 % 1.10 % 0.69 % 0.97 % 0.94 % Return on average stockholders' equity 7.68 % 9.12 % 12.48 % 11.60 % 7.28 % 10.20 % 10.19 % Return on average tangible common equity 7.80 % 9.26 % 12.68 % 11.80 % 7.40 % 10.37 % 10.37 % Net interest margin 2.92 % 2.96 % 3.07 % 3.19 % 3.20 % 3.03 % 3.18 % Efficiency ratio(1) 66.1 % 58.9 % 58.6 % 57.5 % 58.2 % 60.2 % 59.2 % Net loan charge-offs as a % of average loans — % 0.09 % 0.04 % 0.01 % 0.41 % 0.15 % 0.44 % Dividend payout ratio 29.55 % 25.00 % 18.31 % 20.00 % 29.27 % 22.51 % 21.72 % As of December 31 , 2019 September 30 , 2019 June 30 , 2019 March 31 , 2019 December 31 , 2018 Capital ratios: Total Common Equity Tier 1 Capital to Risk-Weighted Assets(2) 12.53 % 12.65 % 12.40 % 12.00 % 11.56 % Total Capital to Risk-Weighted Assets(2) 13.35 % 13.47 % 13.26 % 12.94 % 12.50 % Tier I Capital to Risk-Weighted Assets(2) 12.53 % 12.65 % 12.40 % 12.00 % 11.56 % Tier I Capital to Average Assets(2) 10.99 % 10.88 % 10.75 % 10.53 % 10.14 % Tangible common equity to tangible assets 9.56 % 9.33 % 9.38 % 9.18 % 9.16 % Tangible book value per common share(3) $ 23.15 $ 22.34 $ 22.47 $ 22.38 $ 22.06 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. Represents Bank ratios. Current period capital ratios are preliminary subject to finalization of the FDIC Call Report. Excludes unvested restricted shares of 110,975, 88,473, 94,598, 99,061, and 77,624 as of December 31, 2019 , September 30, 2019 , June 30, 2019 , March 31, 2019 , and December 31, 2018 , respectively. BANKWELL FINANCIAL GROUP, INC. ASSET QUALITY (unaudited) (Dollars in thousands) For the Quarter Ended December 31 , 2019 September 30 , 2019 June 30 , 2019 March 31 , 2019 December 31 , 2018 Allowance for loan losses: Balance at beginning of period $ 13,212 $ 13,890 $ 15,430 $ 15,462 $ 19,311 Charge-offs: Residential real estate — (78 ) (565 ) (233 ) (348 ) Commercial real estate — (594 ) — — (5,596 ) Commercial business (13 ) (748 ) (130 ) (3 ) (719 ) Consumer (5 ) (57 ) (13 ) (2 ) (15 ) Total charge-offs (18 ) (1,477 ) (708 ) (238 ) (6,678 ) Recoveries: Commercial real estate — — — — 18 Commercial business 1 2 6 10 15 Consumer 4 24 3 1 1 Total recoveries 5 26 9 11 34 Net loan charge-offs (13 ) (1,451 ) (699 ) (227 ) (6,644 ) Provision (Credit) for loan losses 310 773 (841 ) 195 2,795 Balance at end of period $ 13,509 $ 13,212 $ 13,890 $ 15,430 $ 15,462 As of December 31 , 2019 September 30 , 2019 June 30 , 2019 March 31 , 2019 December 31 , 2018 Asset quality: Nonaccrual loans Residential real estate $ 1,560 $ 1,583 $ 1,716 $ 3,516 $ 3,812 Commercial real estate 5,222 5,332 4,535 5,880 5,950 Commercial business 3,806 2,963 5,437 3,837 4,320 Total nonaccrual loans 10,588 9,878 11,688 13,233 14,082 Other real estate owned — — 1,217 — — Total nonperforming assets $ 10,588 $ 9,878 $ 12,905 $ 13,233 $ 14,082 Nonperforming loans as a % of total loans 0.66 % 0.63 % 0.75 % 0.83 % 0.88 % Nonperforming assets as a % of total assets 0.56 % 0.53 % 0.69 % 0.70 % 0.75 % Allowance for loan losses as a % of total loans 0.84 % 0.84 % 0.89 % 0.97 % 0.96 % Allowance for loan losses as a % of nonperforming loans 127.59 % 133.75 % 118.84 % 116.60 % 109.80 % Nonperforming assets as a percentage of total assets was 0.56% at December 31, 2019 , down from 0.75% at December 31, 2018 . The allowance for loan losses at December 31, 2019 was $13.5 million , representing 0.84% of total loans. The Company continues to work on the resolution of the previously disclosed large nonperforming lending relationship. Progress to date has been in line with the Company's estimates and, during the fourth quarter of 2019, a claim has been submitted to the Small Business Administration ("SBA") to recover the remaining balance of $1.9 million , representing 10 basis points of the total nonperforming assets to total assets ratio of 0.56%. During the third quarter of 2019, the Company sold its other real estate owned ("OREO") property for a loss of $0.1 million . The Company does not have any OREO as of December 31, 2019 . BANKWELL FINANCIAL GROUP, INC. LOAN & DEPOSIT PORTFOLIO (unaudited) (Dollars in thousands) Period End Loan Composition December 31 , 2019 September 30 , 2019 December 31 , 2018 Current QTD % Change YTD % Change Residential Real Estate $ 147,109 $ 159,193 $ 178,079 (7.6 )% (17.4 )% Commercial Real Estate (1) 1,128,614 1,096,856 1,094,066 2.9 % 3.2 % Construction 98,583 89,878 73,191 9.7 % 34.7 % Total Real Estate Loans 1,374,306 1,345,927 1,345,336 2.1 % 2.2 % Commercial Business 230,028 218,145 258,978 5.4 % (11.2 )% Consumer 150 260 412 (42.3 )% (63.6 )% Total Loans $ 1,604,484 $ 1,564,332 $ 1,604,726 2.6 % — % (1) Includes owner occupied commercial real estate. Period End Deposit Composition December 31 , 2019 September 30 , 2019 December 31 , 2018 Current QTD % Change YTD % Change Noninterest bearing demand $ 191,518 $ 178,733 $ 173,198 7.2 % 10.6 % NOW 70,020 60,645 61,869 15.5 % 13.2 % Money Market 419,495 411,248 471,968 2.0 % (11.1 )% Savings 183,729 176,232 180,487 4.3 % 1.8 % Time 627,141 643,426 614,722 (2.5 )% 2.0 % Total Deposits $ 1,491,903 $ 1,470,284 $ 1,502,244 1.5 % (0.7 )% BANKWELL FINANCIAL GROUP, INC. NONINTEREST INCOME & EXPENSE - QTD (unaudited) (Dollars in thousands) For the Quarter Ended Noninterest income December 31 , 2019 September 30 , 2019 December 31 , 2018 Dec 19 vs. Sep 19 % Change Dec 19 vs. Dec 18 % Change Gains and fees from sales of loans $ 382 $ 703 $ 149 (45.7 )% 156.4 % Bank owned life insurance 250 255 262 (2.0 )% (4.6 )% Service charges and fees 247 264 284 (6.4 )% (13.0 )% Loss on sale of other real estate owned, net — (102 ) — (100.0 )% N/A Other 169 432 (94 ) (60.9 )% 279.8 % Total noninterest income $ 1,048 $ 1,552 $ 601 (32.5 )% 74.4 % Noninterest income increased by $0.4 million , or 74%, to $1.0 million for the quarter ended December 31, 2019 compared to the quarter ended December 31, 2018 . The increase in noninterest income was primarily a result of a $0.2 million increase in gains and fees from the sales of loans, driven by a higher volume of loans sold for the quarter ended December 31, 2019 compared to the same period in 2018. For the Quarter Ended Noninterest expense December 31 , 2019 September 30 , 2019 December 31 , 2018 Dec 19 vs. Sep 19 % Change Dec 19 vs. Dec 18 % Change Salaries and employee benefits $ 5,162 $ 4,881 $ 4,503 5.8 % 14.6 % Occupancy and equipment 1,928 1,946 1,671 (0.9 )% 15.4 % Data processing 499 505 487 (1.2 )% 2.5 % Professional services 402 346 583 16.2 % (31.0 )% Director fees 224 235 295 (4.7 )% (24.1 )% Marketing 220 210 416 4.8 % (47.1 )% Amortization of intangibles 18 19 20 (5.3 )% (10.0 )% FDIC insurance — (125 ) 159 (100.0 )% (100.0 )% Other 771 655 662 17.7 % 16.5 % Total noninterest expense $ 9,224 $ 8,672 $ 8,796 6.4 % 4.9 % Noninterest expense increased by $0.4 million , or 5%, to $9.2 million for the quarter ended December 31, 2019 compared to the quarter ended December 31, 2018 . The increase in noninterest expense was primarily driven by increases in salaries and employee benefits and occupancy and equipment expense. Salaries and employee benefits totaled $5.2 million for the quarter ended December 31, 2019 compared to $4.5 million for the same period in 2018, an increase of $0.7 million . The increase in salaries and employee benefits was primarily driven by an increase in full time equivalent employees and a reduction in deferred loan origination costs. Full time equivalent employees totaled 157 at December 31, 2019 compared to 140 at December 31, 2018 . Occupancy and equipment expense increased by $0.3 million for the quarter ended December 31, 2019 compared to the same period in 2018 as a result of the Company's additional investment in technology. The increase in noninterest expense was primarily offset by a $0.2 million decrease in professional services and a $0.2 million decrease in marketing expenses. BANKWELL FINANCIAL GROUP, INC. NONINTEREST INCOME & EXPENSE - YTD (unaudited) (Dollars in thousands) For the Year Ended Noninterest income December 31 , 2019 December 31 , 2018 % Change Gains and fees from sales of loans $ 1,791 $ 984 82.0 % Service charges and fees 1,023 1,090 (6.1 )% Bank owned life insurance 1,008 1,057 (4.6 )% Net gain on sale of available for sale securities 76 222 (65.8 )% Loss on sale of other real estate owned, net (102 ) — N/A Other 1,448 547 164.7 % Total noninterest income $ 5,244 $ 3,900 34.5 % Noninterest income increased by $1.3 million , or 34%, for the year ended December 31, 2019 compared to the year ended December 31, 2018 . The increase in noninterest income was primarily a result of a $0.8 million increase in gains and fees from sales of loans and a $0.9 million increase in other income. The increase in gains and fees from sales of loans was driven by a higher volume of loans sold for the year ended December 31, 2019 compared to the same period in 2018. The increase in other income was mainly attributable to loan related interest rate swap fees. For the Year Ended Noninterest expense December 31 , 2019 December 31 , 2018 % Change Salaries and employee benefits $ 19,434 $ 18,973 2.4 % Occupancy and equipment 7,594 6,790 11.8 % Data processing 2,067 2,033 1.7 % Professional services 1,857 2,103 (11.7 )% Marketing 971 1,587 (38.8 )% Director fees 863 1,044 (17.3 )% Amortization of intangibles 75 92 (18.5 )% FDIC insurance 74 779 (90.5 )% Other 2,691 2,232 20.6 % Total noninterest expense $ 35,626 $ 35,633 — % Noninterest expense remained flat, totaling $35.6 million for the years ended December 31, 2019 and 2018. Salaries and employee benefits totaled $19.4 million for the year ended December 31, 2019 compared to $19.0 million for the same period in 2018, an increase of $0.5 million . The increase in salaries and employee benefits was primarily driven by an increase in full time equivalent employees and a reduction in deferred loan origination costs. Average full time equivalent employees totaled 150 in 2019 compared to 144 in 2018. Occupancy and equipment expense increased by $0.8 million for the year ended December 31, 2019 compared to the same period in 2018. This increase was primarily associated with a full year of expenses from the prior year's branch expansion and additional investment in technology. FDIC insurance expense decreased by $0.7 million for the year ended December 31, 2019 compared to the same period in 2018 driven by a credit received during the quarter ended September 30, 2019 . 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 December 31 , 2019 September 30 , 2019 June 30 , 2019 March 31 , 2019 December 31 , 2018 Total Equity $ 182,397 $ 176,012 $ 176,940 $ 176,841 $ 174,196 Less: Goodwill 2,589 2,589 2,589 2,589 2,589 Other intangibles 214 232 251 270 290 Tangible Common Equity $ 179,594 $ 173,191 $ 174,100 $ 173,982 $ 171,317 Total Assets $ 1,882,182 $ 1,858,542 $ 1,859,665 $ 1,897,758 $ 1,873,665 Less: Goodwill 2,589 2,589 2,589 2,589 2,589 Other intangibles 214 232 251 270 290 Tangible Assets $ 1,879,379 $ 1,855,721 $ 1,856,825 $ 1,894,899 $ 1,870,786 Tangible Common Equity to Tangible Assets 9.56 % 9.33 % 9.38 % 9.18 % 9.16 % As of Computation of Tangible Book Value per Common Share December 31 , 2019 September 30 , 2019 June 30 , 2019 March 31 , 2019 December 31 , 2018 Total shareholders' equity $ 182,397 $ 176,012 $ 176,940 $ 176,841 $ 174,196 Less: Preferred stock — — — — — Common shareholders' equity $ 182,397 $ 176,012 $ 176,940 $ 176,841 $ 174,196 Less: Goodwill 2,589 2,589 2,589 2,589 2,589 Other intangibles 214 232 251 270 290 Tangible common shareholders' equity $ 179,594 $ 173,191 $ 174,100 $ 173,982 $ 171,317 Common shares 7,868,803 7,841,103 7,841,103 7,873,471 7,842,271 Less: Shares of unvested restricted stock 110,975 88,473 94,598 99,061 77,624 Common shares less unvested restricted stock 7,757,828 7,752,630 7,746,505 7,774,410 7,764,647 Book value per share $ 23.51 $ 22.70 $ 22.84 $ 22.75 $ 22.43 Less: Effects of intangible assets $ 0.36 $ 0.36 $ 0.37 $ 0.37 $ 0.37 Tangible Book Value per Common Share $ 23.15 $ 22.34 $ 22.47 $ 22.38 $ 22.06 BANKWELL FINANCIAL GROUP, INC. RECONCILIATION OF GAAP TO NON-GAAP MEASURES (unaudited) - Continued (Dollars in thousands) For the Quarter Ended For the Year Ended Computation of Efficiency Ratio December 31 , 2019 September 30 , 2019 June 30 , 2019 March 31 , 2019 December 31 , 2018 December 31 , 2019 December 31 , 2018 Noninterest expense $ 9,224 $ 8,672 $ 8,755 $ 8,975 $ 8,796 $ 35,626 $ 35,633 Less: Amortization of intangible assets 18 19 19 19 20 75 92 Other real estate owned expenses — 13 24 — — 37 — Adjusted noninterest expense $ 9,206 $ 8,640 $ 8,712 $ 8,956 $ 8,776 $ 35,514 $ 35,541 Net interest income $ 12,882 $ 13,011 $ 13,595 $ 14,273 $ 14,467 $ 53,761 $ 56,326 Noninterest income 1,048 1,552 1,336 1,308 601 5,244 3,900 Less: Net gain on sale of available for sale securities — — 76 — — 76 222 Loss on sale of other real estate owned, net — (102 ) — — — (102 ) — Adjusted operating revenue $ 13,930 $ 14,665 $ 14,855 $ 15,581 $ 15,068 $ 59,031 $ 60,004 Efficiency ratio 66.1 % 58.9 % 58.6 % 57.5 % 58.2 % 60.2 % 59.2 % For the Quarter Ended For the Year Ended Computation of Return on Average Tangible Common Equity December 31 , 2019 September 30 , 2019 June 30 , 2019 March 31 , 2019 December 31 , 2018 December 31 , 2019 December 31 , 2018 Net Income Attributable to Common Shareholders $ 3,472 $ 4,088 $ 5,576 $ 5,080 $ 3,261 $ 18,216 $ 17,433 Total average shareholders' equity $ 179,312 $ 177,916 $ 179,217 $ 177,532 $ 177,685 $ 178,510 $ 171,024 Less: Average Goodwill 2,589 2,589 2,589 2,589 2,589 2,589 2,589 Average Other intangibles 226 244 264 283 302 254 338 Average tangible common equity $ 176,497 $ 175,083 $ 176,364 $ 174,660 $ 174,794 $ 175,667 $ 168,097 Annualized Return on Average Tangible Common Equity 7.80 % 9.26 % 12.68 % 11.80 % 7.40 % 10.37 % 10.37 % BANKWELL FINANCIAL GROUP, INC. NET INTEREST MARGIN ANALYSIS ON A FULLY TAX EQUIVALENT BASIS - QTD (unaudited) (Dollars in thousands) For the Quarter Ended December 31, 2019 December 31, 2018 Average Balance Interest Yield/ Rate (5) Average Balance Interest Yield/ Rate (5) Assets: Cash and Fed funds sold $ 90,007 $ 427 1.88 % $ 90,131 $ 504 2.23 % Securities(1) 102,696 804 3.13 % 117,947 940 3.19 % Loans: Commercial real estate 1,084,311 12,646 4.56 % 1,053,257 13,253 4.92 % Residential real estate 153,752 1,475 3.84 % 179,886 1,707 3.80 % Construction(2) 88,864 1,126 4.96 % 82,323 1,115 5.30 % Commercial business 245,822 3,397 5.41 % 285,676 3,949 5.41 % Consumer 210 4 7.09 % 363 6 6.33 % Total loans 1,572,959 18,648 4.64 % 1,601,505 20,030 4.89 % Federal Home Loan Bank stock 7,474 108 5.73 % 8,782 138 6.27 % Total earning assets 1,773,136 $ 19,987 4.41 % 1,818,365 $ 21,612 4.65 % Other assets 102,582 67,803 Total assets $ 1,875,718 $ 1,886,168 Liabilities and shareholders' equity: Interest bearing liabilities: NOW $ 63,385 $ 27 0.17 % $ 59,781 $ 65 0.43 % Money market 418,682 1,571 1.49 % 484,932 2,009 1.64 % Savings 181,910 717 1.56 % 164,534 684 1.65 % Time 633,166 3,633 2.28 % 625,874 3,184 2.02 % Total interest bearing deposits 1,297,143 5,948 1.82 % 1,335,121 5,942 1.77 % Borrowed Money 175,198 1,103 2.46 % 189,698 1,134 2.34 % Total interest bearing liabilities 1,472,341 $ 7,051 1.90 % 1,524,819 $ 7,076 1.84 % Noninterest bearing deposits 187,997 172,390 Other liabilities 36,068 11,274 Total liabilities 1,696,406 1,708,483 Shareholders' equity 179,312 177,685 Total liabilities and shareholders' equity $ 1,875,718 $ 1,886,168 Net interest income(3) $ 12,936 $ 14,536 Interest rate spread 2.51 % 2.81 % Net interest margin(4) 2.92 % 3.20 % Average balances and yields for securities are based on amortized cost. Includes commercial and residential real estate construction. The adjustment for securities and loans taxable equivalency amounted to $54 thousand and $69 thousand for the quarters ended December 31, 2019 and 2018, respectively. Annualized net interest income as a percentage of earning assets. 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 Year Ended December 31, 2019 December 31, 2018 Average Balance Interest Yield/ Rate (5) Average Balance Interest Yield/ Rate (5) Assets: Cash and Fed funds sold $ 85,678 $ 1,859 2.17 % $ 77,923 $ 1,428 1.84 % Securities(1) 112,336 3,526 3.14 % 118,311 3,686 3.12 % Loans: Commercial real estate 1,067,290 50,818 4.70 % 1,014,255 47,967 4.66 % Residential real estate 165,384 6,367 3.85 % 189,121 7,016 3.71 % Construction(2) 85,591 4,538 5.23 % 90,773 4,667 5.07 % Commercial business 255,779 15,599 6.01 % 282,425 15,037 5.25 % Consumer 258 17 6.70 % 481 28 5.88 % Total loans 1,574,302 77,339 4.85 % 1,577,055 74,715 4.67 % Federal Home Loan Bank stock 7,502 473 6.31 % 9,177 517 5.63 % Total earning assets 1,779,818 $ 83,197 4.61 % 1,782,466 $ 80,346 4.45 % Other assets 92,663 68,002 Total assets $ 1,872,481 $ 1,850,468 Liabilities and shareholders' equity: Interest bearing liabilities: NOW $ 62,254 $ 128 0.21 % $ 60,410 $ 157 0.26 % Money market 439,867 7,139 1.62 % 482,886 6,431 1.33 % Savings 177,854 2,968 1.67 % 124,214 1,649 1.33 % Time 637,515 14,463 2.27 % 619,448 10,714 1.73 % Total interest bearing deposits 1,317,490 24,698 1.87 % 1,286,958 18,951 1.47 % Borrowed Money 175,267 4,489 2.53 % 213,546 4,787 2.21 % Total interest bearing liabilities 1,492,757 $ 29,187 1.96 % 1,500,504 $ 23,738 1.58 % Noninterest bearing deposits 172,192 166,566 Other liabilities 29,022 12,374 Total liabilities 1,693,971 1,679,444 Shareholders' equity 178,510 171,024 Total liabilities and shareholders' equity $ 1,872,481 $ 1,850,468 Net interest income(3) $ 54,010 $ 56,608 Interest rate spread 2.65 % 2.87 % Net interest margin(4) 3.03 % 3.18 % Average balances and yields for securities are based on amortized cost. Includes commercial and residential real estate construction. The adjustment for securities and loans taxable equivalency amounted to $249 thousand and $282 thousand for the years ended December 31, 2019 and 2018, respectively. Net interest income as a percentage of earning assets. 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/20200127005693/en/ Christopher R. Gruseke , President and Chief Executive Officer or Penko Ivanov , Executive Vice President and Chief Financial Officer of Bankwell Financial Group (203) 652-0166 Source: Bankwell Financial Group, Inc.

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