Bankwell Financial Group Reports Operating Results for the Fourth Quarter and Full Year 2020; Declares 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 $0.3 million , or $0.04 per share, for the fourth quarter of 2020, versus $3.5 million , or $0.44 per share, for the same period in 2019. The Company's Board of Directors declared a $0.14 per share cash dividend, payable February 25, 2021 to shareholders of record on February 15, 2021 . We recommend reading this earnings release in conjunction with the Fourth Quarter 2020 Investor Presentation, located at http://investor.mybankwell.com/Presentations and included as an exhibit to our January 27, 2021 Current Report on Form 8-K. Notes Bankwell Financial Group President and CEO, Christopher R. Gruseke : "The Company made excellent progress this year despite the adversities presented by the Pandemic. Core deposits increased by 43% year over year and, importantly, non-interest bearing deposits grew by over 41%. COVID-19 deferrals have declined to account for less than 2% of the loan portfolio. After a thorough review of each COVID-impacted loan, the Company has taken swift action to reclassify $25.6 million as non-performing. These loans are collateralized and carry adequate reserves. The Company’s outlook for the coming year is increasingly optimistic. Our recently disclosed efficiency initiatives will bolster profitability in 2021 and beyond, and loan originations for the first quarter are tracking to be one our strongest efforts ever." Fourth Quarter 2020 Highlights: Recognized a $3.9 million one-time charge for office consolidation, contract termination and employee severance costs in the fourth quarter of 2020. The allowance for loan losses was $21.0 million and represents 1.29% of total loans (1.32% excluding Paycheck Protection Program (“PPP”) loans) as of December 31, 2020 , compared to an allowance for loan losses of $13.5 million , representing 0.84% of total loans as of December 31, 2019 . The increase in the allowance for loan losses was primarily due to incremental loan loss reserves for increased credit risk relating to economic disruption and uncertainty caused by the COVID-19 pandemic. PPP loans totaled $34.8 million at December 31, 2020 . Less than 2% of the loan portfolio remains on COVID-19 deferral. Total deposits were $1.8 billion at December 31, 2020 compared to $1.5 billion at December 31, 2019 , reflecting successful commercial core deposit gathering efforts, as well as a temporary increase in deposits to expand on-balance sheet liquidity during the COVID-19 pandemic. Noninterest bearing deposits increased 41% to a new high of $270.2 million at December 31, 2020 , when compared to December 31, 2019 . The Bank's loan-to-deposit ratio was 87.9% at December 31, 2020 , reflecting the above-mentioned increase in deposits. Total gross loans were $1.6 billion at December 31, 2020 . Investment securities totaled $106.9 million and represent 5% of total assets. The tangible common equity ratio, as of December 31, 2020 , decreased to 7.73% when compared to December 31, 2019 . The decrease was primarily driven by mark-to-market activity on long dated interest rate swaps, as well as increased liquidity and corresponding balance sheet growth. Tangible book value per share as of December 31, 2020 was $22.43 . Earnings and Performance Revenues (net interest income plus noninterest income) for the quarter ended December 31, 2020 were $14.9 million , versus $13.9 million for the quarter ended December 31, 2019 . Revenues for the year ended December 31, 2020 were $57.7 million , versus $59.0 million for the year ended December 31, 2019 . For the year ended December 31, 2020 , the decrease in revenues was attributable to the absence of SBA loan sales, when compared to the same period 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 period in 2019. The change in revenues for the quarter ended December 31, 2020 was driven by the same factors except that the decline in interest expense outweighed the absence of SBA loan sales and lower yields on loans. Net income for the quarter ended December 31, 2020 was $0.3 million , versus $3.5 million for the quarter ended December 31, 2019 . Net income for the year ended December 31, 2020 was $5.9 million , versus $18.2 million for the year ended December 31, 2019 . The decrease in net income for the quarter and year ended December 31, 2020 , when compared to the same periods in 2019, were impacted by a $3.9 million one-time charge for office consolidation, contract termination and employee severance costs in the fourth quarter of 2020. The decrease in net income for the year ended December 31, 2020 , when compared to the same period in 2019, was also due to an increase in the provision for loan losses due to the COVID-19 pandemic. The provision for loan losses totaled $7.6 million for the year ended December 31, 2020 , consisting of COVID-19 related reserves of $9.0 million , partially offset due to changes in portfolio mix and growth. Basic and diluted earnings per share were each $0.04 for the quarter ended December 31, 2020 compared to basic and diluted earnings per share of $0.44 each for the quarter ended December 31, 2019 . Basic and diluted earnings per share were each $0.75 for the year ended December 31, 2020 compared to basic and diluted earnings per share of $2.32 and $2.31 , respectively, for the year ended December 31, 2019 . The net interest margin (fully taxable equivalent basis) for the quarters ended December 31, 2020 and December 31, 2019 was 2.66% and 2.92%, respectively. The net interest margin for the year ended December 31, 2020 and December 31, 2019 was 2.77% and 3.03%, respectively. The decrease in net interest margin for the quarter and year ended December 31, 2020 , when compared to the same periods in 2019, was primarily due to excess liquidity resulting from successful commercial core deposit gathering efforts as well as a temporary increase in other deposits to expand on-balance sheet liquidity during the COVID-19 pandemic. Financial Condition Assets totaled $2.3 billion at December 31, 2020 , compared to assets of $1.9 billion at December 31, 2019 . The increase in assets is primarily due to an increase in cash and cash equivalents in part to maintain a higher level of liquidity during the COVID-19 pandemic. Gross loans totaled $1.6 billion at December 31, 2020 , an increase of $21.1 million compared to December 31, 2019 . Excluding PPP loans, gross loans decreased by $13.7 million at December 31, 2020 when compared to December 31, 2019 . Deposits totaled $1.8 billion at December 31, 2020 , compared to deposits of $1.5 billion at December 31, 2019 . The increase in deposits was a result of successful commercial core deposit gathering efforts and a temporary increase in deposits during the COVID-19 pandemic, as described above. Capital Shareholders’ equity totaled $176.6 million as of December 31, 2020 , a decrease of $5.8 million compared to December 31, 2019 , primarily a result of an $8.1 million unfavorable impact to accumulated other comprehensive loss driven by fair value marks related to hedge positions involving interest rate swaps, as well as dividends paid of $4.4 million and common stock repurchases of $1.0 million . The decrease was partially offset by net income for the year ended December 31, 2020 of $5.9 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 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. 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. BANKWELL FINANCIAL GROUP, INC. C ONSOLIDATED BALANCE SHEETS (unaudited) (Dollars in thousands) December 31 , 2020 September 30 , 2020 June 30 , 2020 March 31 , 2020 December 31 , 2019 ASSETS Cash and due from banks $ 405,340 $ 333,103 $ 201,380 $ 203,569 $ 78,051 Federal funds sold 4,258 6,380 5,886 6,427 — Cash and cash equivalents 409,598 339,483 207,266 209,996 78,051 Investment securities Marketable equity securities, at fair value 2,207 2,203 2,195 2,289 2,118 Available for sale investment securities, at fair value 88,605 90,563 82,220 82,342 82,439 Held to maturity investment securities, at amortized cost 16,078 16,138 16,196 16,252 16,308 Total investment securities 106,890 108,904 100,611 100,883 100,865 Loans receivable (net of allowance for loan losses of $21,009 , $20,372 , $19,662 , $16,686 , and $13,509 at December 31, 2020 , September 30, 2020 , June 30, 2020 , March 31, 2020 , and December 31, 2019 , respectively) 1,601,672 1,600,776 1,590,995 1,602,146 1,588,840 Other real estate owned — — 180 — — Accrued interest receivable 6,579 7,294 6,774 5,867 5,959 Federal Home Loan Bank stock, at cost 7,860 7,860 7,835 6,507 7,475 Premises and equipment, net 21,762 26,616 27,177 27,835 28,522 Bank-owned life insurance 42,651 42,409 42,167 41,926 41,683 Goodwill 2,589 2,589 2,589 2,589 2,589 Other intangible assets 76 160 178 196 214 Deferred income taxes, net 11,300 11,149 11,352 10,009 5,788 Other assets 42,770 45,782 46,511 45,671 22,196 Total assets $ 2,253,747 $ 2,193,022 $ 2,043,635 $ 2,053,625 $ 1,882,182 LIABILITIES AND SHAREHOLDERS’ EQUITY Liabilities Deposits Noninterest bearing deposits $ 270,235 $ 234,848 $ 214,789 $ 168,448 $ 191,518 Interest bearing deposits 1,557,081 1,532,680 1,405,175 1,512,684 1,300,385 Total deposits 1,827,316 1,767,528 1,619,964 1,681,132 1,491,903 Advances from the Federal Home Loan Bank 175,000 175,000 175,000 125,000 150,000 Subordinated debentures 25,258 25,245 25,233 25,220 25,207 Accrued expenses and other liabilities 49,571 50,982 53,078 52,059 32,675 Total liabilities 2,077,145 2,018,755 1,873,275 1,883,411 1,699,785 Shareholders’ equity Common stock, no par value 121,338 120,854 120,381 119,953 120,589 Retained earnings 70,839 71,603 69,712 69,595 69,324 Accumulated other comprehensive loss (15,575) (18,190) (19,733) (19,334) (7,516) Total shareholders’ equity 176,602 174,267 170,360 170,214 182,397 Total liabilities and shareholders’ equity $ 2,253,747 $ 2,193,022 $ 2,043,635 $ 2,053,625 $ 1,882,182 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 , 2020 September 30 , 2020 June 30 , 2020 March 31 , 2020 December 31 , 2019 December 31 , 2020 December 31 , 2019 Interest and dividend income Interest and fees on loans $ 18,194 $ 18,027 $ 18,459 $ 18,985 $ 18,648 $ 73,665 $ 77,339 Interest and dividends on securities 835 799 778 825 858 3,237 3,750 Interest on cash and cash equivalents 117 96 86 286 427 585 1,859 Total interest and dividend income 19,146 18,922 19,323 20,096 19,933 77,487 82,948 Interest expense Interest expense on deposits 3,557 4,104 4,810 5,709 5,948 18,180 24,698 Interest expense on borrowings 1,285 1,210 876 1,101 1,103 4,472 4,489 Total interest expense 4,842 5,314 5,686 6,810 7,051 22,652 29,187 Net interest income 14,304 13,608 13,637 13,286 12,882 54,835 53,761 Provision for loan losses 709 712 2,999 3,185 310 7,605 437 Net interest income after provision for loan losses 13,595 12,896 10,638 10,101 12,572 47,230 53,324 Noninterest income Bank owned life insurance 241 242 241 243 250 967 1,008 Service charges and fees 210 190 171 217 247 788 1,023 Gains and fees from sales of loans 16 27 — — 382 43 1,791 Gain (loss) on sale of other real estate owned, net — 19 — — — 19 (102) Net gain on sale of available for sale securities — — — — — — 76 Other 154 136 165 612 169 1,067 1,448 Total noninterest income 621 614 577 1,072 1,048 2,884 5,244 Noninterest expense Salaries and employee benefits 5,453 5,295 5,227 5,380 5,162 21,355 19,434 Occupancy and equipment 4,516 2,266 2,235 1,909 1,928 10,926 7,594 Data processing 1,658 529 493 536 499 3,216 2,067 Professional services 591 374 434 711 402 2,110 1,857 Director fees 331 301 287 295 224 1,214 863 FDIC insurance 262 176 283 70 — 791 74 Marketing 118 151 199 162 220 630 971 Other 774 637 564 596 789 2,571 2,766 Total noninterest expense 13,703 9,729 9,722 9,659 9,224 42,813 35,626 Income before income tax expense 513 3,781 1,493 1,514 4,396 7,301 22,942 Income tax expense 177 790 279 151 924 1,397 4,726 Net income $ 336 $ 2,991 $ 1,214 $ 1,363 $ 3,472 $ 5,904 $ 18,216 Earnings Per Common Share: Basic $ 0.04 $ 0.38 $ 0.16 $ 0.17 $ 0.44 $ 0.75 $ 2.32 Diluted $ 0.04 $ 0.38 $ 0.16 $ 0.17 $ 0.44 $ 0.75 $ 2.31 Weighted Average Common Shares Outstanding: Basic 7,726,926 7,721,247 7,715,094 7,750,135 7,745,227 7,728,328 7,757,355 Diluted 7,728,206 7,721,459 7,715,295 7,778,762 7,773,780 7,748,453 7,784,631 Dividends per common share $ 0.14 $ 0.14 $ 0.14 $ 0.14 $ 0.13 $ 0.56 $ 0.52 BANKWELL FINANCIAL GROUP, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited) For the Quarter Ended For the Year Ended December 31 , 2020 September 30 , 2020 June 30 , 2020 March 31 , 2020 December 31 , 2019 December 31 , 2020 December 31 , 2019 Performance ratios: Return on average assets(1) 0.06 % 0.55 % 0.23 % 0.29 % 0.73 % 0.28 % 0.97 % Return on average stockholders' equity(1) 0.75 % 6.87 % 2.82 % 3.03 % 7.68 % 3.35 % 10.20 % Return on average tangible common equity(1) 0.76 % 6.98 % 2.86 % 3.07 % 7.80 % 3.40 % 10.37 % Net interest margin 2.66 % 2.67 % 2.81 % 2.98 % 2.92 % 2.77 % 3.03 % Efficiency ratio(2) 91.2 % 68.4 % 68.2 % 67.1 % 66.1 % 73.9 % 60.2 % Net loan charge-offs as a % of average loans — % — % — % — % — % 0.01 % 0.15 % Dividend payout ratio(3) 350.00 % 36.84 % 87.50 % 82.35 % 29.55 % 74.67 % 22.51 % 2020 performance ratios are negatively impacted by incremental COVID-19 pandemic related loan loss reserves and the $3.9 million one-time charge related to office consolidation, contract termination and employee severance costs recognized in the fourth quarter of 2020. 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. The dividend payout ratio is calculated by dividing dividends per share by earnings per share. As of December 31 , 2020 September 30 , 2020 June 30 , 2020 March 31 , 2020 December 31 , 2019 Capital ratios: Total Common Equity Tier 1 Capital to Risk-Weighted Assets(1) 11.06 % 12.36 % 12.44 % 12.14 % 12.53 % Total Capital to Risk-Weighted Assets(1) 12.28 % 13.57 % 13.63 % 13.13 % 13.35 % Tier I Capital to Risk-Weighted Assets(1) 11.06 % 12.36 % 12.44 % 12.14 % 12.53 % Tier I Capital to Average Assets(1) 8.44 % 9.58 % 9.93 % 10.84 % 10.99 % Tangible common equity to tangible assets 7.73 % 7.83 % 8.21 % 8.16 % 9.56 % Tangible book value per common share(2) $ 22.43 $ 22.20 $ 21.70 $ 21.69 $ 23.15 Represents Bank ratios. Current period capital ratios are preliminary subject to finalization of the FDIC Call Report. Excludes unvested restricted shares of 163,369, 170,083, 165,708, 154,012, and 110,975 as of December 31, 2020 , September 30, 2020 , June 30, 2020 , March 31, 2020 , and December 31, 2019 , respectively. BANKWELL FINANCIAL GROUP, INC. ASSET QUALITY (unaudited) (Dollars in thousands) For the Quarter Ended December 31 , 2020 September 30 , 2020 June 30 , 2020 March 31 , 2020 December 31 , 2019 Allowance for loan losses: Balance at beginning of period $ 20,372 $ 19,662 $ 16,686 $ 13,509 $ 13,212 Charge-offs: Commercial business (75) — — (8) (13) Consumer (11) (4) (23) (2) (5) Total charge-offs (86) (4) (23) (10) (18) Recoveries: Commercial business 14 — — 1 1 Consumer — 2 — 1 4 Total recoveries 14 2 — 2 5 Net loan charge-offs (72) (2) (23) (8) (13) Provision for loan losses 709 712 2,999 3,185 310 Balance at end of period $ 21,009 $ 20,372 $ 19,662 $ 16,686 $ 13,509 As of December 31 , 2020 September 30 , 2020 June 30 , 2020 March 31 , 2020 December 31 , 2019 Asset quality: Nonaccrual loans Residential real estate $ 1,492 $ 1,596 $ 1,622 $ 1,532 $ 1,560 Commercial real estate 21,093 4,812 5,172 5,339 5,222 Commercial business 1,834 3,760 3,783 3,783 3,806 Construction 8,997 — — — — Total nonaccrual loans 33,416 10,168 10,577 10,654 10,588 Other real estate owned — — 180 — — Total nonperforming assets $ 33,416 $ 10,168 $ 10,757 $ 10,654 $ 10,588 Nonperforming loans as a % of total loans 2.06 % 0.63 % 0.66 % 0.66 % 0.66 % Nonperforming assets as a % of total assets 1.48 % 0.46 % 0.53 % 0.52 % 0.56 % Allowance for loan losses as a % of total loans 1.29 % 1.25 % 1.22 % 1.03 % 0.84 % Allowance for loan losses as a % of nonperforming loans 62.87 % 200.35 % 185.89 % 156.62 % 127.59 % Total nonaccrual loans were $33.4 million as of December 31, 2020 , of which $2.6 million are guaranteed by the Small Business Administration (SBA). The Company individually analyzed all existing COVID-19 deferrals and COVID-19 impacted loans for collectability and impairment as of December 31, 2020 , resulting in a $25.6 million increase to the nonperforming loan population which are adequately reserved. Nonperforming assets as a percentage of total assets was 1.48% at December 31, 2020 , up from 0.56% at December 31, 2019 . The allowance for loan losses at December 31, 2020 was $21.0 million , representing 1.29% of total loans. The $7.5 million increase in the allowance for loan losses at December 31, 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. BANKWELL FINANCIAL GROUP, INC. LOAN & DEPOSIT PORTFOLIO (unaudited) (Dollars in thousands) Period End Loan Composition December 31 , 2020 September 30 , 2020 December 31 , 2019 Current QTD % Change YTD % Change Residential Real Estate $ 113,557 $ 120,531 $ 147,109 (5.8) % (22.8) % Commercial Real Estate (1) 1,148,383 1,105,862 1,128,614 3.8 1.8 Construction 87,007 96,508 98,583 (9.8) (11.7) Total Real Estate Loans 1,348,947 1,322,901 1,374,306 2.0 (1.8) Commercial Business 276,601 301,747 230,028 (8.3) 20.2 Consumer 79 78 150 1.3 (47.3) Total Loans $ 1,625,627 $ 1,624,726 $ 1,604,484 0.1 % 1.3 % Includes owner occupied commercial real estate. Period End Deposit Composition December 31 , 2020 September 30 , 2020 December 31 , 2019 Current QTD % Change YTD % Change Noninterest bearing demand $ 270,235 $ 234,848 $ 191,518 15.1 % 41.1 % NOW 101,737 90,776 70,020 12.1 45.3 Money Market 669,364 561,101 419,495 19.3 59.6 Savings 158,750 164,590 183,729 (3.5) (13.6) Time 627,230 716,213 627,141 (12.4) — Total Deposits $ 1,827,316 $ 1,767,528 $ 1,491,903 3.4 % 22.5 % Total deposits were $1.8 billion at December 31, 2020 compared to $1.5 billion at December 31, 2019 , an increase of $0.3 billion , or 22.5%. The increase in total deposits was a result of successful commercial core deposit gathering efforts, as well as a temporary increase in deposits to expand on-balance sheet liquidity during the COVID-19 pandemic. BANKWELL FINANCIAL GROUP, INC. NONINTEREST INCOME (unaudited) (Dollars in thousands) For the Quarter Ended Noninterest income December 31 , 2020 September 30 , 2020 December 31 , 2019 Dec 20 vs. Sep 20 % Change Dec 20 vs. Dec 19 % Change Bank owned life insurance $ 241 $ 242 $ 250 (0.4) % (3.6) % Service charges and fees 210 190 247 10.5 (15.0) Gains and fees from sales of loans 16 27 382 (40.7) (95.8) Gain on sale of other real estate owned, net — 19 — (100.0) N/A Other 154 136 169 13.2 (8.9) Total noninterest income $ 621 $ 614 $ 1,048 1.1 % (40.7) % For the Year Ended Noninterest income December 31 , 2020 December 31 , 2019 % Change Bank owned life insurance $ 967 $ 1,008 (4.1) % Service charges and fees 788 1,023 (23.0) Gains and fees from sales of loans 43 1,791 (97.6) Gain (loss) on sale of other real estate owned, net 19 (102) (118.6) Net gain on sale of available for sale securities — 76 (100.0) Other 1,067 1,448 (26.3) Total noninterest income $ 2,884 $ 5,244 (45.0) % Noninterest income decreased by $0.4 million to $0.6 million for the quarter ended December 31, 2020 compared to the quarter ended December 31, 2019 . Noninterest income decreased by $2.4 million to $2.9 million for the year ended December 31, 2020 , compared to the year ended December 31, 2019 . The decrease in noninterest income was primarily a result of the absence of gains and fees from SBA loan sales for the quarter and year ended December 31, 2020 , when compared to the same periods in 2019. In addition, for the year ended December 31, 2020 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. The decrease in other noninterest income for the year ended December 31, 2020 was primarily a result of a decline in loan related interest rate swap fees in 2020, when compared to the same period in 2019. BANKWELL FINANCIAL GROUP, INC. NONINTEREST EXPENSE (unaudited) (Dollars in thousands) For the Quarter Ended Noninterest expense December 31 , 2020 September 30 , 2020 December 31 , 2019 Dec 20 vs. Sep 20 % Change Dec 20 vs. Dec 19 % Change Salaries and employee benefits $ 5,453 $ 5,295 $ 5,162 3.0 % 5.6 % Occupancy and equipment 4,516 2,266 1,928 99.3 134.2 Data processing 1,658 529 499 213.4 232.3 Professional services 591 374 402 58.0 47.0 Director fees 331 301 224 10.0 47.8 FDIC insurance 262 176 — 48.9 N/A Marketing 118 151 220 (21.9) (46.4) Other 774 637 789 21.5 (1.9) Total noninterest expense $ 13,703 $ 9,729 $ 9,224 40.8 % 48.6 % For the Year Ended Noninterest expense December 31 , 2020 December 31 , 2019 % Change Salaries and employee benefits $ 21,355 $ 19,434 9.9 % Occupancy and equipment 10,926 7,594 43.9 Data processing 3,216 2,067 55.6 Professional services 2,110 1,857 13.6 Director fees 1,214 863 40.7 FDIC insurance 791 74 968.9 Marketing 630 971 (35.1) Other 2,571 2,766 (7.0) Total noninterest expense $ 42,813 $ 35,626 20.2 % Noninterest expense increased by $4.5 million , or 48.6%, to $13.7 million for the quarter ended December 31, 2020 compared to the quarter ended December 31, 2019 . Noninterest expense increased by $7.2 million , or 20.2%, to $42.8 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 . The increase in noninterest expense was primarily driven by $3.9 million in one-time charges recognized during the fourth quarter of 2020. These one-time charges impacted salaries and employee benefits, occupancy and equipment expense and data processing expense. Salaries and employee benefits totaled $5.5 million for the quarter ended December 31, 2020 , an increase of $0.3 million when compared to the same period in 2019. Salaries and employee benefits totaled $21.4 million for the year ended December 31, 2020 , an increase of $1.9 million when compared to the same period in 2019. The increase in salaries and employee benefits was primarily driven by a $0.8 million expense for the Voluntary Early Retirement Incentive Plan offered to eligible employees and additional severance charges recognized during the fourth quarter of 2020. The increase in salaries and employee benefits was also driven by normal annual salary increases and key hires in support of growth initiatives, partially offset by a reduction in overall headcount. Occupancy and equipment expense totaled $4.5 million for the quarter ended December 31, 2020 , an increase of $2.6 million when compared to the same period in 2019. Occupancy and equipment expense totaled $10.9 million for the year ended December 31, 2020 , an increase of $3.3 million when compared to the same period in 2019. The increase in occupancy and equipment expense was primarily due to a $2.0 million one-time expense related to office and branch consolidation recognized during the fourth quarter of 2020. In addition, the increase in occupancy and equipment expense was due to additional cleaning costs associated with precautions taken to prevent the spread of COVID-19. Data processing expense totaled $1.7 million for the quarter ended December 31, 2020 , an increase of $1.2 million when compared to the same period in 2019. Data processing expense totaled $3.2 million for the year ended December 31, 2020 , an increase of $1.1 million when compared to the same period in 2019. The increase in data processing expense was primarily driven by a $1.1 million one-time charge related to early termination fees payable to a legacy technology vendor. 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 , 2020 September 30 , 2020 June 30 , 2020 March 31 , 2020 December 31 , 2019 Total Equity $ 176,602 $ 174,267 $ 170,360 $ 170,214 $ 182,397 Less: Goodwill 2,589 2,589 2,589 2,589 2,589 Other intangibles 76 160 178 196 214 Tangible Common Equity $ 173,937 $ 171,518 $ 167,593 $ 167,429 $ 179,594 Total Assets $ 2,253,747 $ 2,193,022 $ 2,043,635 $ 2,053,625 $ 1,882,182 Less: Goodwill 2,589 2,589 2,589 2,589 2,589 Other intangibles 76 160 178 196 214 Tangible Assets $ 2,251,082 $ 2,190,273 $ 2,040,868 $ 2,050,840 $ 1,879,379 Tangible Common Equity to Tangible Assets 7.73 % 7.83 % 8.21 % 8.16 % 9.56 % As of Computation of Tangible Book Value per Common Share December 31 , 2020 September 30 , 2020 June 30 , 2020 March 31 , 2020 December 31 , 2019 Total shareholders' equity $ 176,602 $ 174,267 $ 170,360 $ 170,214 $ 182,397 Less: Preferred stock — — — — — Common shareholders' equity $ 176,602 $ 174,267 $ 170,360 $ 170,214 $ 182,397 Less: Goodwill 2,589 2,589 2,589 2,589 2,589 Other intangibles 76 160 178 196 214 Tangible common shareholders' equity $ 173,937 $ 171,518 $ 167,593 $ 167,429 $ 179,594 Common shares 7,919,278 7,896,503 7,887,503 7,871,419 7,868,803 Less: Shares of unvested restricted stock 163,369 170,083 165,708 154,012 110,975 Common shares less unvested restricted stock 7,755,909 7,726,420 7,721,795 7,717,407 7,757,828 Book value per share $ 22.77 $ 22.55 $ 22.06 $ 22.06 $ 23.51 Less: Effects of intangible assets $ 0.34 $ 0.36 $ 0.36 $ 0.36 $ 0.36 Tangible Book Value per Common Share $ 22.43 $ 22.20 $ 21.70 $ 21.69 $ 23.15 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 , 2020 September 30 , 2020 June 30 , 2020 March 31 , 2020 December 31 , 2019 December 31 , 2020 December 31 , 2019 Noninterest expense $ 13,703 $ 9,729 $ 9,722 $ 9,659 $ 9,224 $ 42,813 $ 35,626 Less: Amortization of intangible assets 84 18 18 18 18 138 75 Other real estate owned expenses — — 6 — — 6 37 Adjusted noninterest expense $ 13,619 $ 9,711 $ 9,698 $ 9,641 $ 9,206 $ 42,669 $ 35,514 Net interest income $ 14,304 $ 13,608 $ 13,637 $ 13,286 $ 12,882 $ 54,835 $ 53,761 Noninterest income 621 614 577 1,072 1,048 2,884 5,244 Less: Net gain on sale of available for sale securities — — — — — — 76 Gain (loss) on sale of other real estate owned, net — 19 — — — 19 (102) Operating revenue $ 14,925 $ 14,203 $ 14,214 $ 14,358 $ 13,930 $ 57,700 $ 59,031 Efficiency ratio 91.2 % 68.4 % 68.2 % 67.1 % 66.1 % 73.9 % 60.2 % For the Quarter Ended For the Year Ended Computation of Return on Average Tangible Common Equity December 31 , 2020 September 30 , 2020 June 30 , 2020 March 31 , 2020 December 31 , 2019 December 31 , 2020 December 31 , 2019 Net Income Attributable to Common Shareholders $ 336 $ 2,991 $ 1,214 $ 1,363 $ 3,472 $ 5,904 $ 18,216 Total average shareholders' equity $ 178,439 $ 173,162 $ 173,289 $ 181,127 $ 179,312 $ 176,489 $ 178,510 Less: Average Goodwill 2,589 2,589 2,589 2,589 2,589 2,589 2,589 Average Other intangibles 153 172 190 208 226 180 254 Average tangible common equity $ 175,697 $ 170,401 $ 170,510 $ 178,330 $ 176,497 $ 173,720 $ 175,667 Annualized Return on Average Tangible Common Equity 0.76 % 6.98 % 2.86 % 3.07 % 7.80 % 3.40 % 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, 2020 December 31, 2019 Average Balance Interest Yield/ Rate (5) Average Balance Interest Yield/ Rate (5) Assets: Cash and Fed funds sold $ 424,327 $ 117 0.11 % $ 90,007 $ 427 1.88 % Securities(1) 105,422 814 3.09 102,696 804 3.13 Loans: Commercial real estate 1,096,912 12,753 4.55 1,084,311 12,646 4.56 Residential real estate 115,104 1,009 3.51 153,752 1,475 3.84 Construction(2) 93,909 910 3.79 88,864 1,126 4.96 Commercial business 311,995 3,520 4.41 245,822 3,397 5.41 Consumer 96 2 7.41 210 4 7.09 Total loans 1,618,016 18,194 4.40 1,572,959 18,648 4.64 Federal Home Loan Bank stock 7,859 74 3.75 7,474 108 5.73 Total earning assets 2,155,624 $ 19,199 3.48 % 1,773,136 $ 19,987 4.41 % Other assets 123,435 102,582 Total assets $ 2,279,059 $ 1,875,718 Liabilities and shareholders' equity: Interest bearing liabilities: NOW $ 93,126 $ 42 0.18 % $ 63,385 $ 27 0.17 % Money market 644,685 858 0.53 418,682 1,571 1.49 Savings 168,307 164 0.39 181,910 717 1.56 Time 686,827 2,493 1.44 633,166 3,633 2.28 Total interest bearing deposits 1,592,945 3,557 0.89 1,297,143 5,948 1.82 Borrowed Money 200,250 1,285 2.51 175,198 1,103 2.46 Total interest bearing liabilities 1,793,195 $ 4,842 1.07 % 1,472,341 $ 7,051 1.90 % Noninterest bearing deposits 255,843 187,997 Other liabilities 51,582 36,068 Total liabilities 2,100,620 1,696,406 Shareholders' equity 178,439 179,312 Total liabilities and shareholders' equity $ 2,279,059 $ 1,875,718 Net interest income(3) $ 14,357 $ 12,936 Interest rate spread 2.41 % 2.51 % Net interest margin(4) 2.66 % 2.92 % 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 $53 thousand and $54 thousand for the quarters ended December 31, 2020 and 2019, 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, 2020 December 31, 2019 Average Balance Interest Yield/ Rate (5) Average Balance Interest Yield/ Rate (5) Assets: Cash and Fed funds sold $ 261,689 $ 585 0.22 % $ 85,678 $ 1,859 2.17 % Securities(1) 98,938 3,103 3.14 112,336 3,526 3.14 Loans: Commercial real estate 1,095,367 51,218 4.60 1,067,290 50,818 4.70 Residential real estate 129,585 4,645 3.58 165,384 6,367 3.85 Construction(2) 97,230 4,262 4.31 85,591 4,538 5.23 Commercial business 295,662 13,530 4.50 255,779 15,599 6.01 Consumer 121 10 8.00 258 17 6.70 Total loans 1,617,965 73,665 4.48 1,574,302 77,339 4.85 Federal Home Loan Bank stock 7,625 346 4.53 7,502 473 6.31 Total earning assets 1,986,217 $ 77,699 3.85 % 1,779,818 $ 83,197 4.61 % Other assets 125,261 92,663 Total assets $ 2,111,478 $ 1,872,481 Liabilities and shareholders' equity: Interest bearing liabilities: NOW $ 80,805 $ 141 0.17 % $ 62,254 $ 128 0.21 % Money market 516,527 4,071 0.79 439,867 7,139 1.62 Savings 169,763 1,368 0.81 177,854 2,968 1.67 Time 712,461 12,600 1.77 637,515 14,463 2.27 Total interest bearing deposits 1,479,556 18,180 1.23 1,317,490 24,698 1.87 Borrowed Money 190,463 4,472 2.31 175,267 4,489 2.53 Total interest bearing liabilities 1,670,019 $ 22,652 1.36 % 1,492,757 $ 29,187 1.96 % Noninterest bearing deposits 215,073 172,192 Other liabilities 49,897 29,022 Total liabilities 1,934,989 1,693,971 Shareholders' equity 176,489 178,510 Total liabilities and shareholders' equity $ 2,111,478 $ 1,872,481 Net interest income(3) $ 55,047 $ 54,010 Interest rate spread 2.49 % 2.65 % Net interest margin(4) 2.77 % 3.03 % 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 $212 thousand and $249 thousand for the years ended December 31, 2020 and 2019, 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. View source version on businesswire.com : https://www.businesswire.com/news/home/20210127005954/en/ 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 Source: Bankwell Financial Group, Inc.

View stock analysis, news, and events for Bankwell Financial Group, Inc.