What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-11-04 compared with 2020-08-07 · 200 added, 212 removed, 1005 unchanged (29% of the section changed)

3 unchanged sentences

(In thousands, except share data)

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Cash and due from banks $ 333,103 $ 78,051

4 unchanged sentences

Available for sale investment securities, at fair value 90,563 82,439

Held to maturity investment securities, at amortized cost (fair values of $ 19,750 and $ 18,307 at June 30, 2020 and December 31, 2019, respectively)

Held to maturity investment securities, at amortized cost (fair values of $ 19,816 and $ 18,307 at September 30, 2020 and December 31, 2019, respectively)

16,138 16,308

Total investment securities 108,904 100,865

Loans receivable (net of allowance for loan losses of $ 19,662 at June 30, 2020 and $ 13,509 at December 31, 2019)

Loans receivable (net of allowance for loan losses of $ 20,372 at September 30, 2020 and $ 13,509 at December 31, 2019)

1,600,776 1,588,840

Other real estate owned 180 —

Accrued interest receivable 7,294 5,959

12 unchanged sentences

Advances from the Federal Home Loan Bank 175,000 150,000

Subordinated debentures ($ 25,500 face, less unamortized debt issuance costs of $ 267 and $ 293 at June 30, 2020 and December 31, 2019, respectively)

Subordinated debentures ($ 25,500 face, less unamortized debt issuance costs of $ 255 and $ 293 at September 30, 2020 and December 31, 2019, respectively)

25,245 25,207

4 unchanged sentences

Common stock, no par value;

10,000,000 shares authorized, 7,887,503 and 7,868,803 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively

10,000,000 shares authorized, 7,896,503 and 7,868,803 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

120,854 120,589

7 unchanged sentences

(In thousands, except share data)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

9 unchanged sentences

Net interest income 13,608 13,011 40,531 40,879

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

Net interest income after provision (credit) for loan losses 10,638 14,436 20,739 28,514

Provision for loan losses 712 773 6,896 127

Net interest income after provision for loan losses 12,896 12,238 33,635 40,752

Noninterest income

2 unchanged sentences

Gains and fees from sales of loans 27 703 27 1,409

Gain (loss) on sale of other real estate owned, net 19 ( 102 ) 19 ( 102 )

Net gain on sale of available for sale securities — — — 76

26 unchanged sentences

(In thousands)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Net income $ 2,991 $ 4,088 $ 5,568 $ 14,744

Other comprehensive loss:

Unrealized gains on securities:

Unrealized holding gains on available for sale securities 534 1,279 2,758 2,670

Other comprehensive income (loss):

Unrealized (losses) gains on securities:

Unrealized holding (losses) gains on available for sale securities ( 97 ) 353 2,661 3,022

Reclassification adjustment for gain realized in net income — — — ( 76 )

Net change in unrealized gains 534 1,203 2,758 2,594

Income tax expense ( 116 ) ( 252 ) ( 610 ) ( 545 )

Unrealized gains on securities, net of tax 418 951 2,148 2,049

Unrealized losses on interest rate swaps:

Unrealized losses on interest rate swaps ( 1,044 ) ( 5,974 ) ( 18,470 ) ( 10,046 )

Income tax benefit 227 1,254 4,105 2,109

Unrealized losses on interest rate swaps, net of tax ( 817 ) ( 4,720 ) ( 14,365 ) ( 7,937 )

Total other comprehensive loss, net of tax ( 399 ) ( 3,769 ) ( 12,217 ) ( 5,888 )

Net change in unrealized (losses) gains ( 97 ) 353 2,661 2,946

Income tax benefit (expense) 21 ( 74 ) ( 589 ) ( 618 )

Unrealized (losses) gains on securities, net of tax ( 76 ) 279 2,072 2,328

Unrealized gains (losses) on interest rate swaps:

Unrealized gains (losses) on interest rate swaps 2,070 ( 5,766 ) ( 16,400 ) ( 15,811 )

Income tax (expense) benefit ( 451 ) 1,211 3,654 3,319

Unrealized gains (losses) on interest rate swaps, net of tax 1,619 ( 4,555 ) ( 12,746 ) ( 12,492 )

Total other comprehensive income (loss), net of tax 1,543 ( 4,276 ) ( 10,674 ) ( 10,164 )

Comprehensive income (loss) $ 4,534 $ ( 188 ) $ ( 5,106 ) $ 4,580

4 unchanged sentences

Number of Outstanding Shares Common Stock Retained Earnings Accumulated Other Comprehensive Loss Total

Balance at March 31, 2020 7,871,419 $ 119,953 $ 69,595 $ ( 19,334 ) $ 170,214

Balance at June 30, 2020 7,887,503 $ 120,381 $ 69,712 $ ( 19,733 ) $ 170,360

Net income — — 2,991 — 2,991

Other comprehensive loss, net of tax — — — ( 399 ) ( 399 )

Other comprehensive income, net of tax — — — 1,543 1,543

Cash dividends declared ($ 0.14 per share)

1 unchanged sentence

Stock-based compensation expense — 473 — — 473

Forfeitures of restricted stock ( 75 ) — — — —

Issuance of restricted stock 9,000 — — — —

Balance at June 30, 2020 7,887,503 $ 120,381 $ 69,712 $ ( 19,733 ) $ 170,360

Balance at September 30, 2020 7,896,503 $ 120,854 $ 71,603 $ ( 18,190 ) $ 174,267

Number of Outstanding Shares Common Stock Retained Earnings Accumulated Other Comprehensive Loss Total

Balance at March 31, 2019 7,873,471 $ 120,750 $ 59,247 $ ( 3,156 ) $ 176,841

Balance at June 30, 2019 7,841,103 $ 120,064 $ 63,801 $ ( 6,925 ) $ 176,940

Net income — — 4,088 — 4,088

3 unchanged sentences

Stock-based compensation expense — 279 — — 279

Forfeitures of restricted stock ( 50 ) — — — —

Stock options exercised 1,850 23 — — 23

Repurchase of common stock ( 34,168 ) ( 988 ) — — ( 988 )

Balance at June 30, 2019 7,841,103 $ 120,064 $ 63,801 $ ( 6,925 ) $ 176,940

Balance at September 30, 2019 7,841,103 $ 120,343 $ 66,870 $ ( 11,201 ) $ 176,012

See accompanying notes to consolidated financial statements (unaudited)

13 unchanged sentences

Repurchase of common stock ( 58,499 ) ( 1,037 ) — — ( 1,037 )

Balance at June 30, 2020 7,887,503 $ 120,381 $ 69,712 $ ( 19,733 ) $ 170,360

Balance at September 30, 2020 7,896,503 $ 120,854 $ 71,603 $ ( 18,190 ) $ 174,267

Number of Outstanding Shares Common Stock Retained Earnings Accumulated Other Comprehensive Loss Total

11 unchanged sentences

Repurchase of common stock ( 34,168 ) ( 988 ) — — ( 988 )

Balance at June 30, 2019 7,841,103 $ 120,064 $ 63,801 $ ( 6,925 ) $ 176,940

Balance at September 30, 2019 7,841,103 $ 120,343 $ 66,870 $ ( 11,201 ) $ 176,012

See accompanying notes to consolidated financial statements (unaudited)

2 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities

2 unchanged sentences

Net amortization (accretion) of premiums and discounts on investment securities 47 ( 375 )

Provision (credit) for loan losses 6,184 ( 646 )

Provision for loan losses 6,896 127

(Credit) provision for deferred income taxes ( 2,353 ) 330

6 unchanged sentences

Stock-based compensation 1,286 774

Net accretion of purchase accounting adjustments ( 36 ) ( 39 )

Amortization of intangibles 54 57

Loss on sale of premises and equipment — 10

(Gain) loss on sale of other real estate owned, net ( 19 ) 102

Net change in:

8 unchanged sentences

Net proceeds from sales and calls of available for sale securities 2,200 15,455

Net proceeds from calls of held to maturity securities — 3,900

Purchases of marketable equity securities ( 28 ) ( 34 )

5 unchanged sentences

(Purchase) reduction of Federal Home Loan Bank stock ( 385 ) 635

Proceeds from the sale of other real estate owned 199 1,115

Net cash (used in) provided by investing activities ( 26,388 ) 54,049

3 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from financing activities

28 unchanged sentences

The Bank provides a full range of banking services to commercial and consumer customers, primarily concentrated in the New York metropolitan area and throughout Connecticut, with the majority of the Company's loans in Fairfield and New Haven Counties, Connecticut, with branch locations in New Canaan, Stamford, Fairfield, Wilton, Westport, Darien, Norwalk, Hamden and North Haven Connecticut.

The Company has committed to permanently close its North Haven branch as of December 31, 2020.

Principles of consolidation

9 unchanged sentences

Many businesses in the U.S., including those in the markets we serve, were required to close, causing a significant increase in unemployment and loss of revenue for those businesses.

During the second quarter of 2020, many states began to phase in the reopening of businesses, the success of which remains uncertain.

The COVID-19 pandemic influenced the assumptions and estimates used in the consolidated financial statements.

3 unchanged sentences

The pandemic could cause us to experience higher credit losses in our loan portfolio, impairment of our goodwill, reduced demand for our products and services, or other negative impacts on our financial position, results of operations, and prospects.

The Company tests for goodwill impairment annually as of June 30th.

No impairment was required to be recorded on goodwill during the six months ended June 30, 2020 or for the year ended December 31, 2019.

Basis of consolidated financial statement presentation

2 unchanged sentences

Interim results are not necessarily reflective of the results that may be expected for the year ending December 31, 2020.

The accompanying unaudited interim consolidated financial statements

should be read in conjunction with the audited consolidated financial statements and notes thereto included on Form 10-K for the year ended December 31, 2019.

The accompanying unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included on Form 10-K for the year ended December 31, 2019.

Significant concentrations of credit risk

Many of the Company's activities are with customers located in the New York Metropolitan area and throughout Fairfield and New Haven Counties and the surrounding region of Connecticut, and declines in property values in these areas could significantly impact the Company.

significantly impact the Company.

The Company has significant concentrations in commercial real estate loans.

Management does not believe they present any special risk.

The Company does not have any significant concentrations in any one industry or customer.

38 unchanged sentences

(1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy;

(2) the policy for timing of transfers between levels;

(2) the policy for timing of

transfers between levels;

and (3) the valuation processes for Level 3 fair value measurements.

4 unchanged sentences

The application of this guidance did not have a material impact on the Company's financial statements.

2020-04, Reference Rate Reform (Topic 848):

"Facilitation of the Effects of Reference Rate Reform on Financial Reporting." This ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022.

Optional expedients include that modifications of contracts should be accounted for by prospectively adjusting the effective interest rate and modifications of leases should be accounted for as a continuation of the existing contract with no reassessments of lease classification and discount rate or remeasurements of lease payments.

This ASU also provides many practical expedients for derivative accounting.

In addition, an entity may elect to sell and/or transfer held to maturity securities that reference a rate affected by the reference rate reform classified as held to maturity prior to January 1, 2020.

The application of this guidance did not have a material impact on the Company's financial statements.

Investment Securities

The amortized cost, gross unrealized gains and losses and fair value of available for sale and held to maturity securities at June 30, 2020 were as follows:

June 30, 2020

The amortized cost, gross unrealized gains and losses and fair value of available for sale and held to maturity securities at September 30, 2020 were as follows:

September 30, 2020

Amortized Cost Gross Unrealized Fair Value

2 unchanged sentences

Government and agency obligations

Less than one year $ 1,100 $ 3 $ — $ 1,103

Due from one through five years $ 9,970 $ 219 $ — $ 10,189

30 unchanged sentences

Total held to maturity securities $ 16,308 $ 1,999 $ — $ 18,307

There were no sales of investment securities during the three or six months ended June 30, 2020.

The gross realized gains on the sale of investment securities totaled $ 0.1 million for the three and six months ended June 30, 2019.

The gross realized losses on the sale of investment securities totaled $ 17.0 thousand for the three and six months ended June 30, 2019.

At June 30, 2020 and December 31, 2019, none of the Company's securities were pledged as collateral with the Federal Home Loan Bank ("FHLB") or any other institution.

As of June 30, 2020 and December 31, 2019, the actual durations of the Company's available for sale securities were significantly shorter than the stated maturities.

As of June 30, 2020, the Company held marketable equity securities with a fair value of $ 2.2 million and an amortized cost of $ 2.1 million.

There were no sales of investment securities during the three or nine months ended September 30, 2020.

The gross realized gains on the sale of investment securities totaled $ 0.1 million for the nine months ended September 30, 2019.

There were no sales of investment securities during the three months ended September 30, 2019.

The gross realized losses on the sale of investment securities totaled $ 17.0 thousand for the nine months ended September 30, 2019.

At September 30, 2020 and December 31, 2019, none of the Company's securities were pledged as collateral with the Federal Home Loan Bank ("FHLB") or any other institution.

As of September 30, 2020 and December 31, 2019, the actual durations of the Company's available for sale securities were significantly shorter than the stated maturities.

As of September 30, 2020, the Company held marketable equity securities with a fair value of $ 2.2 million and an amortized cost of $ 2.1 million.

At December 31, 2019, the Company held marketable equity securities with a fair value of $ 2.1 million and an amortized cost of $ 2.0 million.

These securities represent an investment in mutual funds that have an objective to make investments for CRA purposes.

There were one and two investment securities as of June 30, 2020 and December 31, 2019, respectively, in which the fair value of the security was less than the amortized cost of the security.

The following table provides information regarding investment securities with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2020 and December 31, 2019:

There were two investment securities as of December 31, 2019, in which the fair value of the security was less than the amortized cost of the security.

There were no such investment securities as of September 30, 2020.

Length of Time in Continuous Unrealized Loss Position

5 unchanged sentences

(Dollars in thousands)

June 30, 2020

Corporate bonds $ 2,991 $ ( 9 ) 0.31 % $ — $ — — % $ 2,991 $ ( 9 ) 0.31 %

Total investment securities $ 2,991 $ ( 9 ) 0.31 % $ — $ — — % $ 2,991 $ ( 9 ) 0.31 %

December 31, 2019

2 unchanged sentences

Loans Receivable and Allowance for Loan Losses

The following table sets forth a summary of the loan portfolio at June 30, 2020 and December 31, 2019:

(In thousands) June 30, 2020 December 31, 2019

The following table sets forth a summary of the loan portfolio at September 30, 2020 and December 31, 2019:

(In thousands) September 30, 2020 December 31, 2019

Real estate loans:

11 unchanged sentences

Loans receivable, net $ 1,600,776 $ 1,588,840

(1) The June 30, 2020 balance includes $ 56.5 million of Paycheck Protection Program ("PPP") loans made under the Coronavirus Aid, Relief and Economic Security Act ("CARES Act").

(1) The September 30, 2020 balance includes $ 56.7 million of Paycheck Protection Program ("PPP") loans made under the Coronavirus Aid, Relief and Economic Security Act ("CARES Act").

Lending activities are conducted principally in the New York metropolitan area and throughout Connecticut, with the majority in Fairfield and New Haven Counties of Connecticut, and consist of commercial real estate loans, commercial business loans and, to a lesser degree, a variety of consumer loans.

41 unchanged sentences

Allowance for loan losses

The following tables set forth the activity in the Company’s allowance for loan losses for the three and six months ended June 30, 2020 and 2019, by portfolio segment:

The allowance for loan losses as of June 30, 2020 totaled $ 19.7 million, an increase of $ 6.2 million when compared to December 31, 2019.

This increase in loan loss reserves is driven by management’s assessment of increased credit risk relating to economic disruption and uncertainty caused by the COVID-19 pandemic applied to the loan population that is being collectively evaluated for impairment, as opposed to the population of loans that is being individually evaluated for impairment.

The following tables set forth the activity in the Company’s allowance for loan losses for the three and nine months ended September 30, 2020 and 2019, by portfolio segment:

The allowance for loan losses as of September 30, 2020 totaled $ 20.4 million, an increase of $ 6.9 million when compared to December 31, 2019.

This increase in loan loss reserves is driven by management’s assessment of increased credit risk relating to economic disruption and uncertainty caused by the COVID-19 pandemic.

Residential Real Estate Commercial Real Estate Construction Commercial Business Consumer Total

(In thousands)

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Beginning balance $ 809 $ 14,409 $ 441 $ 4,003 $ — $ 19,662

1 unchanged sentence

Recoveries — — — — 2 2

Provisions (credits) 24 1,275 ( 25 ) 1,702 23 2,999

(Credits) provisions ( 95 ) 491 ( 7 ) 321 2 712

Ending balance $ 714 $ 14,900 $ 434 $ 4,324 $ — $ 20,372

1 unchanged sentence

(In thousands)

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

Beginning balance $ 923 $ 9,910 $ 259 $ 2,797 $ 1 $ 13,890

1 unchanged sentence

Recoveries — — — 2 24 26

Provisions (credits) 769 ( 1,736 ) 46 70 10 ( 841 )

(Credits) provisions ( 54 ) 778 2 14 33 773

Ending balance $ 791 $ 10,094 $ 261 $ 2,065 $ 1 $ 13,212

1 unchanged sentence

(In thousands)

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Beginning balance $ 730 $ 10,551 $ 324 $ 1,903 $ 1 $ 13,509

1 unchanged sentence

Recoveries — — — 1 2 3

Provisions 79 3,858 117 2,107 23 6,184

(Credits) provisions ( 16 ) 4,349 110 2,427 26 6,896

Ending balance $ 714 $ 14,900 $ 434 $ 4,324 $ — $ 20,372

1 unchanged sentence

(In thousands)

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

Beginning balance $ 857 $ 11,562 $ 140 $ 2,902 $ 1 $ 15,462

3 unchanged sentences

Ending balance $ 791 $ 10,094 $ 261 $ 2,065 $ 1 $ 13,212

Loans evaluated for impairment and the related allowance for loan losses as of June 30, 2020 and December 31, 2019 were as follows:

Loans evaluated for impairment and the related allowance for loan losses as of September 30, 2020 and December 31, 2019 were as follows:

Portfolio Allowance

(In thousands)

June 30, 2020

September 30, 2020

Loans individually evaluated for impairment:

43 unchanged sentences

In addition to internal review at multiple points, outsourced loan review opines on risk ratings with regard to the sample of loans their review covers.

The following tables present credit risk ratings by loan segment as of June 30, 2020 and December 31, 2019:

The following tables present credit risk ratings by loan segment as of September 30, 2020 and December 31, 2019:

Commercial Credit Quality Indicators

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Commercial Real Estate Construction Commercial Business Total Commercial Real Estate Construction Commercial Business Total

7 unchanged sentences

Residential and Consumer Credit Quality Indicators

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Residential Real Estate Consumer Total Residential Real Estate Consumer Total

15 unchanged sentences

A loan is considered to be no longer delinquent when timely payments are made for a period of at least six months (one year for loans providing for quarterly or semi-annual payments) by the borrower in accordance with the contractual terms.

Loans granted payment deferrals under the CARES Act are not required to be reported as past due or placed on non-accrual status (provided the loans were not past due or on non-accrual status prior to the deferral).

The following tables set forth certain information with respect to the Company's loan portfolio delinquencies by portfolio segment as of June 30, 2020 and December 31, 2019:

June 30, 2020

Loans that are granted payment deferrals under the CARES Act are not required to be reported as past due or placed on non-accrual status if the criteria under section 4013 of the CARES Act is met.

The following tables set forth certain information with respect to the Company's loan portfolio delinquencies by portfolio segment as of September 30, 2020 and December 31, 2019:

September 30, 2020

30-59 Days Past Due 60-89 Days Past Due 90 Days or Greater Past Due Total Past Due Current Total Loans

17 unchanged sentences

Total loans $ 1,712 $ 943 $ 9,671 $ 12,326 $ 1,592,158 $ 1,604,484

There were no loans delinquent greater than 90 days and still accruing interest as of June 30, 2020.

There were no loans delinquent greater than 90 days and still accruing interest as of September 30, 2020.

There was one loan, totaling $ 3.4 million, delinquent greater than 90 days and still accruing interest as of December 31, 2019.

1 unchanged sentence

Loans on nonaccrual status

The following is a summary of nonaccrual loans by portfolio segment as of June 30, 2020 and December 31, 2019:

June 30, 2020 December 31, 2019

The following is a summary of nonaccrual loans by portfolio segment as of September 30, 2020 and December 31, 2019:

September 30, 2020 December 31, 2019

(In thousands)

3 unchanged sentences

Total $ 10,168 $ 10,588

Nonaccrual loans totaled $ 10.6 million at June 30, 2020, of which $ 4.6 million is guaranteed by the SBA.

Interest income on loans that would have been recognized if loans on nonaccrual status had been current in accordance with their original terms for the six months ended June 30, 2020 and 2019 was $ 0.4 million and $ 0.6 million, respectively.

There was no interest income recognized on these loans for the six months ended June 30, 2020 and $ 43 thousand of interest income was recognized on these loans for the six months ended June 30, 2019.

At June 30, 2020 and December 31, 2019, there were no commitments to lend additional funds to any borrower on nonaccrual status.

Nonaccrual loans with no specific reserve totaled $ 9.4 million and $ 9.6 million at June 30, 2020 and December 31, 2019, respectively.

Nonaccrual loans totaled $ 10.2 million at September 30, 2020, of which $ 4.5 million is guaranteed by the SBA.

Interest income on loans that would have been recognized if loans on nonaccrual status had been current in accordance with their original terms for the nine months ended September 30, 2020 and 2019 was $ 0.6 million and $ 0.5 million, respectively.

There was no interest income recognized on these loans for the nine months ended September 30, 2020 and $ 44 thousand of interest income was recognized on these loans for the nine months ended September 30, 2019.

At September 30, 2020 and December 31, 2019, there were no commitments to lend additional funds to any borrower on nonaccrual status.

Nonaccrual loans with no specific reserve totaled $ 9.3 million and $ 9.6 million at September 30, 2020 and December 31, 2019, respectively.

Impaired loans

2 unchanged sentences

When the Company classifies a problem loan as impaired, it evaluates whether a specific valuation allowance is required for that portion of the asset that is estimated to be impaired.

The following table summarizes impaired loans by portfolio segment as of June 30, 2020 and December 31, 2019:

The following table summarizes impaired loans by portfolio segment as of September 30, 2020 and December 31, 2019:

Carrying Amount Unpaid Principal Balance Associated Allowance

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

September 30, 2020 December 31, 2019 September 30, 2020 December 31, 2019 September 30, 2020 December 31, 2019

(In thousands)

9 unchanged sentences

Total impaired loans $ 21,681 $ 22,553 $ 23,467 $ 24,193 $ 1,523 $ 506

The following tables summarizes the average carrying amount of impaired loans and interest income recognized on impaired loans by portfolio segment for the three and six months ended June 30, 2020 and 2019:

The following tables summarizes the average carrying amount of impaired loans and interest income recognized on impaired loans by portfolio segment for the three and nine months ended September 30, 2020 and 2019:

Average Carrying Amount Interest Income Recognized

Three Months Ended June 30, Three Months Ended June 30,

Three Months Ended September 30, Three Months Ended September 30,

2020 2019 2020 2019

4 unchanged sentences

Commercial business 4,123 1,253 5 7

Consumer — 2 — —

Total impaired loans without a valuation allowance 15,534 10,686 58 77

Impaired loans with a valuation allowance:

Residential real estate $ — $ 108 $ — $ —

Commercial real estate $ 6,259 $ 766 $ 78 $ 3

3 unchanged sentences

Average Carrying Amount Interest Income Recognized

Six Months Ended June 30, Six Months Ended June 30,

Nine Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

4 unchanged sentences

Commercial business 4,173 1,368 15 19

Consumer — 2 — —

Total impaired loans without a valuation allowance 15,769 10,181 194 266

Impaired loans with a valuation allowance:

Residential real estate $ — $ 108 $ — $ —

Commercial real estate $ 6,278 $ 778 $ 204 $ 5

10 unchanged sentences

Nonaccrual classification may be removed if the borrower demonstrates compliance with the modified terms for a minimum of six months.

Loans classified as TDRs totaled $ 9.3 million at June 30, 2020 and $ 9.6 million at December 31, 2019.

The following tables provide information on loans that were modified as TDRs during the periods indicated.

Number of Loans Pre-Modification Post-Modification

(Dollars in thousands) 2020 2019 2020 2019 2020 2019

Three Months Ended June 30,

Residential real estate — 1 $ — $ 34 $ — $ 34

Commercial business — 2 — 465 — 465

Total — 3 $ — $ 499 $ — $ 499

Loans classified as TDRs totaled $ 9.2 million at September 30, 2020 and $ 9.6 million at December 31, 2019.

The following table provides information on loans that were modified as TDRs during the nine months ended September 30, 2020 and 2019.

There were no loans modified as TDRs during the three months ended September 30, 2020 and September 30, 2019.

Number of Loans Pre-Modification Post-Modification

(Dollars in thousands) 2020 2019 2020 2019 2020 2019

Six Months Ended June 30,

Nine Months Ended September 30,

Residential real estate — 1 $ — $ 34 $ — $ 34

1 unchanged sentence

Total — 3 $ — $ 499 $ — $ 499

At June 30, 2020 and December 31, 2019, there were three nonaccrual loans identified as TDRs totaling $ 1.5 million and three nonaccrual loans identified as TDRs totaling $ 1.6 million, respectively.

There were no loans modified in a troubled debt restructuring that re-defaulted during the six months ended June 30, 2020.

There were two loans modified in a troubled debt restructuring that re-defaulted during the six months ended June 30, 2019.

The total recorded investment in these loans was $ 1.3 million at June 30, 2019.

The following table provides information on how loans were modified as TDRs during the three and six months ended June 30, 2020 and June 30, 2019.

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

At September 30, 2020 and December 31, 2019, there were three nonaccrual loans identified as TDRs totaling $ 1.5 million and three nonaccrual loans identified as TDRs totaling $ 1.6 million, respectively.

There were no loans modified in a troubled debt restructuring that re-defaulted during the nine months ended September 30, 2020.

There were two loans modified in a troubled debt restructuring that re-defaulted during the nine months ended September 30, 2019.

The total recorded investment in these loans was $ 1.3 million at September 30, 2019.

The following table provides information on how loans were modified as TDRs during the nine months ended September 30, 2020 and September 30, 2019.

There were no loans modified as TDRs during the three months ended September 30, 2020 and September 30, 2019.

Nine Months Ended September 30,

(In thousands)

4 unchanged sentences

All short term loan modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any request for relief are not considered TDRs.

As of June 30, 2020, the Company granted COVID-19 related deferrals on loans (excluding SBA loans, which are paid for 6 months by the SBA on behalf of borrowers) totaling $ 339.9 million.

The Company has thoroughly evaluated these deferral requests and granted initial payment deferrals of no more than three months in duration, except for SBA loans which are mandated to receive an automatic six month deferral.

As of September 30, 2020, the Company has active COVID-19 related deferrals on 12 loans (excluding SBA loans, which are paid for 6 months by the SBA on behalf of borrowers) totaling $ 32.7 million.

In addition, the Company was evaluating 10 loans, totaling $ 31.3 million, for a second COVID-19 deferral term.

The Company has granted initial three month payment deferral periods and, in some instances, a second three month payment deferral period.

This excludes SBA loans, which are mandated to receive an automatic six month deferral.

These deferrals are not considered troubled debt restructurings based on Section 4013 of the CARES Act and interagency guidance issued in March of 2020.

2 unchanged sentences

Shareholders' Equity

The Company has 10,000,000 shares authorized and 7,887,503 shares issued and outstanding at June 30, 2020 and 10,000,000 shares authorized and 7,868,803 shares issued and outstanding at December 31, 2019.

The Company has 10,000,000 shares authorized and 7,896,503 shares issued and outstanding at September 30, 2020 and 10,000,000 shares authorized and 7,868,803 shares issued and outstanding at December 31, 2019.

The Company's stock is traded on the NASDAQ stock market under the ticker symbol BWFG.

In connection with a 2014 acquisition and the associated merger agreement, the Company had issued warrants convertible to shares of common stock at a pre-determined price and exchange ratio.

The Company does not have any warrants outstanding as of June 30, 2020.

The Company does not have any warrants outstanding as of September 30, 2020.

The Company’s shareholders are entitled to dividends when and if declared by the Board of Directors out of funds legally available.

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The share repurchase plan does not obligate the Company to acquire any particular amount of Common Stock, and it may be modified or suspended at any time at the Company's discretion.

During the six months ended June 30, 2020, the Company purchased 58,499 shares of its Common Stock at a weighted average price of $ 17.69 per share.

During the nine months ended September 30, 2020, the Company purchased 58,499 shares of its Common Stock at a weighted average price of $ 17.69 per share.

During the year ended December 31, 2019, the Company purchased 34,168 shares of its Common Stock at a weighted average price of $ 28.87 per share.

4 unchanged sentences

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.

The Company’s total comprehensive income or loss for the three and six months ended June 30, 2020 and June 30, 2019 is reported in the Consolidated Statements of Comprehensive Income.

The following tables present the changes in accumulated other comprehensive income (loss) by component, net of tax for the three and six months ended June 30, 2020 and June 30, 2019:

The Company’s total comprehensive income or loss for the three and nine months ended September 30, 2020 and September 30, 2019 is reported in the Consolidated Statements of Comprehensive Income.

The following tables present the changes in accumulated other comprehensive income (loss) by component, net of tax for the three and nine months ended September 30, 2020 and September 30, 2019:

Net Unrealized Gain (Loss) on Available for Sale Securities Net Unrealized Gain (Loss) on Interest Rate Swaps Total

(In thousands)

Balance at March 31, 2020 $ 2,658 $ ( 21,992 ) $ ( 19,334 )

Other comprehensive income (loss) before reclassifications, net of tax 418 ( 817 ) ( 399 )

Net other comprehensive income (loss) 418 ( 817 ) ( 399 )

Balance at June 30, 2020 $ 3,076 $ ( 22,809 ) $ ( 19,733 )

Other comprehensive (loss) income before reclassifications, net of tax ( 76 ) 1,619 1,543

Net other comprehensive (loss) income ( 76 ) 1,619 1,543

Balance at September 30, 2020 $ 3,000 $ ( 21,190 ) $ ( 18,190 )

Net Unrealized Gain (Loss) on Available for Sale Securities Net Unrealized Gain (Loss) on Interest Rate Swaps Total

(In thousands)

Balance at March 31, 2019 $ ( 281 ) $ ( 2,875 ) $ ( 3,156 )

Balance at June 30, 2019 $ 670 $ ( 7,595 ) $ ( 6,925 )

Other comprehensive income (loss) before reclassifications, net of tax 279 ( 4,555 ) ( 4,276 )

Amounts reclassified from accumulated other comprehensive income, net of tax ( 60 ) — ( 60 )

Net other comprehensive income (loss) 279 ( 4,555 ) ( 4,276 )

Balance at June 30, 2019 $ 670 $ ( 7,595 ) $ ( 6,925 )

Balance at September 30, 2019 $ 949 $ ( 12,150 ) $ ( 11,201 )

Net Unrealized Gain (Loss) on Available for Sale Securities Net Unrealized Gain (Loss) on Interest Rate Swaps Total

3 unchanged sentences

Net other comprehensive income (loss) 2,072 ( 12,746 ) ( 10,674 )

Balance at June 30, 2020 $ 3,076 $ ( 22,809 ) $ ( 19,733 )

Balance at September 30, 2020 $ 3,000 $ ( 21,190 ) $ ( 18,190 )

Net Unrealized Gain (Loss) on Available for Sale Securities Net Unrealized Gain (Loss) on Interest Rate Swaps Total

4 unchanged sentences

Net other comprehensive income (loss) 2,328 ( 12,492 ) ( 10,164 )

Balance at June 30, 2019 $ 670 $ ( 7,595 ) $ ( 6,925 )

Balance at September 30, 2019 $ 949 $ ( 12,150 ) $ ( 11,201 )

The following table provides information for the items reclassified from accumulated other comprehensive income or loss:

Accumulated Other Comprehensive Income Components Three Months Ended June 30, Six Months Ended June 30, Associated Line Item in the Consolidated Statements of Income

Accumulated Other Comprehensive Income Components Three Months Ended September 30, Nine Months Ended September 30, Associated Line Item in the Consolidated Statements of Income

2020 2019 2020 2019

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The following table is a reconciliation of earnings available to common shareholders and basic weighted average common shares outstanding to diluted weighted average common shares outstanding, reflecting the application of the two-class method:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

16 unchanged sentences

(2) Represents the effect of the assumed exercise of stock options and the vesting of restricted shares, as applicable, utilizing the treasury stock method.

(3) Represents stock-based awards not included in the computation of potential common shares for purposed of calculating diluted EPS as the exercise prices were greater than the average market price of the Company's common stock, and, therefore, are considered anti-dilutive.

(3) Represents stock-based awards not included in the computation of potential common shares for purpose of calculating diluted EPS as the exercise prices were greater than the average market price of the Company's common stock, and, therefore, are considered anti-dilutive.

Regulatory Matters

13 unchanged sentences

The Bank did exercise its opt-out option and excludes the unrealized gain (loss) on investment securities component of accumulated other comprehensive income (loss) from regulatory capital.

The Basel III Capital Rules limit a banking organization’s capital distributions and certain discretionary bonus payments to executive officers if the banking organization does not hold a “capital conservation buffer” of 2.5 % in addition to the minimum

risk based capital requirement.

The “capital conservation buffer” was phased in from January 1, 2016 to January 1, 2019, when the full capital conservation buffer became effective.

Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements.

As of June 30, 2020, the Bank and Company met all capital adequacy requirements to which they are subject.

As of September 30, 2020, the Bank and Company met all capital adequacy requirements to which they are subject.

There are no conditions or events since then that management believes have changed this conclusion.

The capital amounts and ratios for the Bank and the Company at June 30, 2020 and December 31, 2019 were as follows:

The capital amounts and ratios for the Bank and the Company at September 30, 2020 and December 31, 2019 were as follows:

Minimum Regulatory Capital Required for Capital Adequacy plus Capital Conservation Buffer Minimum Regulatory Capital to be Well Capitalized Under Prompt Corrective Action Provisions

2 unchanged sentences

Bankwell Bank

June 30, 2020

September 30, 2020

Common Equity Tier 1 Capital to Risk-Weighted Assets $ 207,920 12.36 % $ 117,747 7.00 % $ 109,337 6.50 %

3 unchanged sentences

Bankwell Financial Group, Inc.

June 30, 2020

September 30, 2020

Common Equity Tier 1 Capital to Risk-Weighted Assets $ 189,742 11.28 % $ 117,747 7.00 % N/A N/A

22 unchanged sentences

Reserve Requirements on Cash

The Bank was not required to maintain a minimum reserve balance in the Federal Reserve Bank (FRB) at June 30, 2020 as the FRB has waived this requirement due to the COVID-19 pandemic.

The Bank was not required to maintain a minimum reserve balance in the Federal Reserve Bank (FRB) at September 30, 2020 as the FRB has waived this requirement due to the COVID-19 pandemic.

The Bank was required to maintain a minimum reserve balance of $ 14.1 million in the Federal Reserve Bank at December 31, 2019.

This balance is maintained for clearing purposes in the ordinary course of business and does not represent restricted cash.

At June 30, 2020 and December 31, 2019, deposits consisted of the following:

At September 30, 2020 and December 31, 2019, deposits consisted of the following:

September 30,

2020 December 31, 2019

8 unchanged sentences

Total deposits $ 1,767,528 $ 1,491,903

Maturities of time certificates of deposit as of June 30, 2020 and December 31, 2019 are summarized below:

Maturities of time certificates of deposit as of September 30, 2020 and December 31, 2019 are summarized below:

September 30,

2020 December 31, 2019

3 unchanged sentences

2022 46,894 28,515

2023 128,269 239

2024 30,160 93

Total $ 716,213 $ 627,141

The aggregate amount of individual certificate accounts, including brokered deposits with balances of $ 250,000 or more, was approximately $ 341.2 million at June 30, 2020 and $ 307.1 million at December 31, 2019.

Brokered certificates of deposits totaled $ 214.2 million at June 30, 2020 and $ 179.8 million at December 31, 2019.

Certificates of deposits from national listing services totaled $ 50.4 million at June 30, 2020 and $ 21.3 million at December 31, 2019.

Brokered money market accounts totaled $ 71.9 million at June 30, 2020 and $ 39.9 million at December 31, 2019.

The following table summarizes interest expense by account type for the three and six months ended June 30, 2020 and 2019:

Three Months Ended June 30, Six Months Ended June 30,

The aggregate amount of individual certificate accounts, including brokered deposits with balances of $250,000 or more, was approximately $ 419.3 million at September 30, 2020 and $ 307.1 million at December 31, 2019.

Brokered certificates of deposits totaled $ 296.0 million at September 30, 2020 and $ 179.8 million at December 31, 2019.

Certificates of deposits from national listing services totaled $ 23.8 million at September 30, 2020 and $ 21.3 million at December 31, 2019.

Brokered money market accounts totaled $ 28.7 million at September 30, 2020 and $ 39.9 million at December 31, 2019.

The following table summarizes interest expense by account type for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

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To date, all equity awards have been in the form of stock options or restricted stock.

At June 30, 2020, there were 642,025 shares reserved for future issuance under the 2012 Plan.

At September 30, 2020, there were 633,025 shares reserved for future issuance under the 2012 Plan.

Stock Options :

The Company accounts for stock options based on the fair value at the date of grant and records an expense over the vesting period of such awards on a straight line basis.

There were no options granted during the six months ended June 30, 2020.

A summary of the status of outstanding stock options for the six months ended June 30, 2020 is presented below:

Six Months Ended June 30, 2020

There were no options granted during the nine months ended September 30, 2020.

A summary of the status of outstanding stock options for the nine months ended September 30, 2020 is presented below:

Nine Months Ended September 30, 2020

Number of Shares Weighted Average Exercise Price

4 unchanged sentences

Intrinsic value is the amount by which the fair value of the underlying stock exceeds the exercise price of an option on the exercise date.

The total intrinsic value of share options exercised during the six months ended June 30, 2020 was $ 27 thousand.

The range of exercise prices for the 15,180 options exercisable at June 30, 2020 was $ 15.00 to $ 17.86 per share.

The weighted average remaining contractual life for these options was 2.2 years at June 30, 2020.

At June 30, 2020, as all awarded options have vested, all of the outstanding options are exercisable, and based on the June 30, 2020 closing market price of $ 15.90 , the outstanding options have an intrinsic value of $ 5 thousand.

The total intrinsic value of share options exercised during the nine months ended September 30, 2020 was $ 27 thousand.

The range of exercise prices for the 15,180 options exercisable at September 30, 2020 was $ 15.00 to $ 17.86 per share.

The weighted average remaining contractual life for these options was 2.0 years at September 30, 2020.

At September 30, 2020, as all awarded options have vested, all of the outstanding options are exercisable, and based on the September 30, 2020 closing market price of $ 14.15 , the outstanding options have no intrinsic value.

Restricted Stock :

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Restricted stock awards generally vest over one to five years .

The following table presents the activity for restricted stock for the six months ended June 30, 2020:

Six Months Ended June 30, 2020

The following table presents the activity for restricted stock for the nine months ended September 30, 2020:

Nine Months Ended September 30, 2020

Number of Shares Weighted Average Grant Date Fair Value

6 unchanged sentences

(2) Includes 16,000 shares of performance based restricted stock

The total fair value of restricted stock awards vested during the six months ended June 30, 2020 was $ 0.5 million.

The Company's restricted stock expense for the six months ended June 30, 2020 and June 30, 2019 was $ 0.8 million and $ 0.5 million, respectively.

At June 30, 2020, there was $ 3.8 million of unrecognized stock compensation expense for restricted stock, expected to be recognized over a weighted average period of 1.9 years.

The total fair value of restricted stock awards vested during the nine months ended September 30, 2020 was $ 0.6 million.

The Company's restricted stock expense for the nine months ended September 30, 2020 and September 30, 2019 was $ 1.3 million and $ 0.8 million, respectively.

At September 30, 2020, there was $ 3.4 million of unrecognized stock compensation expense for restricted stock, expected to be recognized over a weighted average period of 1.9 years.

Performance Based Restricted Stock :

The Company has 37,750 shares of performance based restricted stock outstanding as of June 30, 2020 pursuant to the Company’s 2012 Stock Plan.

The Company has 37,750 shares of performance based restricted stock outstanding as of September 30, 2020 pursuant to the Company’s 2012 Stock Plan.

The awards vest over a three to four year service period, provided certain performance metrics are met.

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The Company does not use derivatives for speculative purposes.

As of June 30, 2020, the Company was a party to nine interest rate swaps, designated as hedging instruments, to add stability to interest expense and to manage its exposure to interest rate movements.

As of September 30, 2020, the Company was a party to nine interest rate swaps, designated as hedging instruments, to add stability to interest expense and to manage its exposure to interest rate movements.

The notional amount for each swap is $ 25 million and in each case, the Company has entered into pay-fixed interest rate swaps to convert rolling 90 days Federal Home Loan Bank advances or brokered deposits.

In addition, as of June 30, 2020, the Company was a party to one forward-starting interest rate swap on probable future FHLB advances or brokered deposits.

As of June 30, 2020, the Company entered into four interest rate swaps not designated as hedging instruments, to minimize interest rate risk exposure with loans to customers.

As of September 30, 2020, the Company entered into four interest rate swaps not designated as hedging instruments, to minimize interest rate risk exposure with loans to customers.

The Company accounts for all non-borrower related interest rate swaps as effective cash flow hedges.

6 unchanged sentences

Interest rate swaps with a positive fair value are recorded as other assets and interest rate swaps with a negative fair value are recorded as other liabilities on the Consolidated Balance Sheets.

Information about derivative instruments at June 30, 2020 and December 31, 2019 is as follows:

June 30, 2020:

Information about derivative instruments at September 30, 2020 and December 31, 2019 is as follows:

September 30, 2020:

(Dollars in thousands) Notional Amount Original Maturity Maturity Date Received Paid Fair Value Asset (Liability)

Derivatives designated as hedging instruments:

Interest rate swap $ 25,000 5.0 years August 26, 2020 3-month USD LIBOR 1.48 % $ ( 43 )

Interest rate swap $ 25,000 5.0 years July 1, 2021 3-month USD LIBOR 1.22 % $ ( 190 )

6 unchanged sentences

Interest rate swap 25,000 5.0 years April 23, 2025 3-month USD LIBOR 0.54 % ( 267 )

Forward-starting interest rate swap (1)

25,000 15.0 years August 26, 2035 3-month USD LIBOR 3.05 % ( 8,313 )

Interest rate swap 25,000 15.0 years August 26, 2035 3-month USD LIBOR 3.05 % ( 7,773 )

$ 225,000 $ ( 27,091 )

5 unchanged sentences

Total derivatives $ 302,000 $ ( 27,091 )

(1) The effective date of the forward-starting interest rate swap listed above is August 26, 2020.

(1) Represents interest rate swaps with commercial banking customers, which are offset by derivatives with a third party.

Accrued interest payable related to interest rate swaps as of June 30, 2020 totaled $ 0.3 million and is excluded from the fair value presented in the table above.

The fair value of interest rate swaps in a net liability position, including accrued interest, totaled $ 29.4 million as of June 30, 2020.

Accrued interest payable related to interest rate swaps as of September 30, 2020 totaled $ 0.6 million and is excluded from the fair value presented in the table above.

The fair value of interest rate swaps in a net liability position, including accrued interest, totaled $ 27.7 million as of September 30, 2020.

December 31, 2019:

27 unchanged sentences

The Company does not offset derivative assets and derivative liabilities for financial statement presentation purposes.

The Company's cash flow hedge positions consist of interest rate swap transactions as detailed in the table below as of June 30, 2020:

The Company's cash flow hedge positions consist of interest rate swap transactions as detailed in the table below as of September 30, 2020:

Notional Amount Original Effective Date of Hedged Borrowing Duration of Borrowing Counterparty

(Dollars in thousands)

$ 25,000 August 26, 2015 5.0 years Bank of Montreal

$ 25,000 July 1, 2016 5.0 years Bank of Montreal

6 unchanged sentences

25,000 April 29, 2020 5.0 years Goldman Sachs Bank USA

25,000 August 26, 2020 15.0 years FHN Financial Capital Markets

This hedge strategy converts the rate of interest on short term rolling FHLB advances or brokered deposits to long term fixed interest rates, thereby protecting the Company from interest rate variability.

Changes in the consolidated statements of comprehensive (loss) income related to interest rate derivatives designated as hedges of cash flows were as follows for the three and six months ended June 30, 2020 and June 30, 2019:

Three Months Ended June 30, Six Months Ended June 30,

Changes in the consolidated statements of comprehensive income (loss) related to interest rate derivatives designated as hedges of cash flows were as follows for the three and nine months ended September 30, 2020 and September 30, 2019:

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands) 2020 2019 2020 2019

Interest rate swap on FHLB advances and brokered deposits:

Unrealized losses recognized in accumulated other comprehensive (loss) income $ ( 1,044 ) $ ( 5,974 ) $ ( 18,470 ) $ ( 10,046 )

Income tax benefit on items recognized in accumulated other comprehensive (loss) income 227 1,254 4,105 2,109

Other comprehensive loss $ ( 817 ) $ ( 4,720 ) $ ( 14,365 ) $ ( 7,937 )

Unrealized gains (losses) recognized in accumulated other comprehensive income (loss) $ 2,070 $ ( 5,766 ) $ ( 16,400 ) $ ( 15,811 )

Income tax (expense) benefit on items recognized in accumulated other comprehensive income (loss) ( 451 ) 1,211 3,654 3,319

Other comprehensive income (loss) $ 1,619 $ ( 4,555 ) $ ( 12,746 ) $ ( 12,492 )

Amount recognized in interest expense on hedged FHLB advances and brokered deposits $ 1,010 $ 742 $ 2,844 $ 2,202

$ 944 $ 734 $ 1,834 $ 1,460

The above unrealized gains and losses are reflective of market interest rates as of the respective balance sheet dates.

Generally, a lower interest rate environment will result in a negative impact to comprehensive income whereas a higher interest rate environment will result in a positive impact to comprehensive income.

The following tables summarize gross and net information about derivative instruments that are offset in the Consolidated Balance Sheets at June 30, 2020 and December 31, 2019:

June 30, 2020

The following tables summarize gross and net information about derivative instruments that are offset in the Consolidated Balance Sheets at September 30, 2020 and December 31, 2019:

September 30, 2020

(In thousands)

3 unchanged sentences

(1) Includes accrued interest receivable totaling $ 38.4 thousand.

June 30, 2020

September 30, 2020

(In thousands)

3 unchanged sentences

(1) Includes accrued interest payable totaling $ 640.3 thousand.

(2) Actual cash collateral posted totaled $ 33.7 million, total cash collateral posted in the above table represents the total value to net the derivative liabilities to $ 0 .

December 31, 2019

27 unchanged sentences

Management monitors rates and maturities of assets and liabilities and attempts to minimize interest rate risk.

The carrying values, fair values and placement in the fair value hierarchy of the Company's financial instruments at June 30, 2020 and December 31, 2019 were as follows:

June 30, 2020

The carrying values, fair values and placement in the fair value hierarchy of the Company's financial instruments at September 30, 2020 and December 31, 2019 were as follows:

September 30, 2020

Carrying Value Fair Value Level 1 Level 2 Level 3

7 unchanged sentences

Loans receivable, net 1,600,776 1,611,664 — — 1,611,664

Other real estate owned 180 180 — — 180

Accrued interest receivable 7,294 7,294 — 7,294 —

45 unchanged sentences

Level 3 held to maturity securities represent private placement municipal housing authority bonds for which no quoted market price is available.

The fair value for these securities is estimated using a discounted cash flow model, using discount rates ranging from 3.2 % to 3.6 % as of June 30, 2020 and 3.8 % to 4.1 % as of December 31, 2019.

The fair value for these securities is estimated using a discounted cash flow model, using discount rates ranging from 3.1 % to 3.5 % as of September 30, 2020 and 3.8 % to 4.1 % as of December 31, 2019.

These securities are CRA eligible investments.

5 unchanged sentences

The fair value estimate of the loans includes an expected credit loss.

Other real estate owned:

Fair values are generally determined based on third-party appraisals which may be adjusted based on age of appraisal or market conditions identified while preparing the property to be listed for sale through broker quotes or otherwise.

Appraisals are based on observable market data such as comparable sales, however, adjustments made to

third-party appraisals, for the age of the appraisal or market conditions identified while preparing the property to be listed for sale through broker quotes or otherwise are unobservable and therefore these assets are classified as Level 3 within the valuation hierarchy.

Derivative asset (liability):

The valuation of the Company’s interest rate swaps is obtained from a third-party pricing service and is determined using a discounted cash flow analysis on the expected cash flows of each derivative.

The pricing analysis is based on observable inputs for the contractual terms of the derivatives, including the period to maturity and interest rate curves.

The pricing analysis is based on observable inputs for the contractual terms of the derivatives, including the period to maturity and

interest rate curves.

The Company also considers the creditworthiness of each counterparty for assets and the creditworthiness of the Company for liabilities.

9 unchanged sentences

Off-balance-sheet instruments:

Loan commitments on which the committed interest rate is less than the current market rate are insignificant at June 30, 2020 and December 31, 2019.

Loan commitments on which the committed interest rate is less than the current market rate are insignificant at September 30, 2020 and December 31, 2019.

Fair Value Measurements

13 unchanged sentences

Financial instruments measured at fair value on a recurring basis

The following table details the financial instruments carried at fair value on a recurring basis at June 30, 2020 and December 31, 2019, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value.

The Company had no transfers into or out of Levels 1, 2 or 3 during the six months ended June 30, 2020 and for the year ended December 31, 2019.

The following table details the financial instruments carried at fair value on a recurring basis at September 30, 2020 and December 31, 2019, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value.

The Company had no transfers into or out of Levels 1, 2 or 3 during the nine months ended September 30, 2020 and for the year ended December 31, 2019.

(In thousands) Level 1 Level 2 Level 3

June 30, 2020:

September 30, 2020:

Marketable equity securities $ 2,203 $ — $ —

1 unchanged sentence

Government and agency obligations 10,189 71,716 —

Corporate bonds — 8,658 —

Derivative asset — 5,474 —

17 unchanged sentences

These include assets that are measured at the lower-of-cost-or-market that were recognized at fair value below cost at the end of the period as well as assets that are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment.

The following table details the financial instruments measured at fair value on a nonrecurring basis at June 30, 2020 and December 31, 2019, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:

The following table details the financial instruments measured at fair value on a nonrecurring basis at September 30, 2020 and December 31, 2019, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:

(In thousands) Level 1 Level 2 Level 3

June 30, 2020:

September 30, 2020:

Impaired loans $ — $ — $ 20,158

Other real estate owned — — 180

Servicing asset, net — — 618

2 unchanged sentences

Servicing asset, net — — 915

The following table presents information about quantitative inputs and assumptions for Level 3 financial instruments carried at fair value on a nonrecurring basis at June 30, 2020 and December 31, 2019:

The following table presents information about quantitative inputs and assumptions for Level 3 financial instruments carried at fair value on a nonrecurring basis at September 30, 2020 and December 31, 2019:

Fair Value Valuation Methodology Unobservable Input Range

(Dollars in thousands)

June 30, 2020:

September 30, 2020:

Impaired loans $ 10,595 Appraisals Discount to appraised value 8.00 - 27.00 %

9,563 Discounted cash flows Discount rate 3.00 - 7.00 %

Other real estate owned $ 180 Purchase Offer Not Applicable

Servicing asset, net $ 618 Discounted cash flows Discount rate 10.00 % (1)

13 unchanged sentences

Collateral is typically valued using appraisals or other indications of value based on recent comparable sales of similar properties or other assumptions.

Estimates of fair value

based on collateral are generally based on assumptions not observable in the marketplace and therefore such valuations have been classified as Level 3.

Estimates of fair value based on collateral are generally based on assumptions not observable in the marketplace and therefore such valuations have been classified as Level 3.

For those loans where the primary source of repayment is cash flow from operations, adjustments include impairment amounts calculated based on the perceived collectability of interest payments on the basis of a discounted cash flow analysis utilizing a discount rate equivalent to the original note rate.

Other real estate owned:

The Company classifies property acquired through foreclosure or acceptance of deed-in lieu of foreclosure as other real estate owned in its financial statements.

Upon taking title, the property securing the loan is written down to fair value less expected selling costs.

The write-down is based upon differences between the estimated fair value and the net investment in the loan.

Appraisals are based on observable market data such as comparable sales, however, adjustments made to third-party appraisals, for the age of the appraisal or market conditions identified while preparing the property to be listed for sale through broker quotes or otherwise are unobservable and therefore these assets are classified as Level 3 within the valuation hierarchy.

Servicing assets and liabilities:

4 unchanged sentences

On August 19, 2015, the Company completed a private placement of $ 25.5 million in aggregate principal amount of fixed rate subordinated notes (the “Notes”) to certain institutional investors.

The Notes are non-callable for five years , have a stated maturity of August 15, 2025, and bear interest at a quarterly pay fixed rate of 5.75 % per annum to the maturity date or the early redemption date, August 2020 and annually thereafter.

The Notes are non-callable for five years , have a stated maturity of August 15, 2025, and bear interest at a quarterly pay fixed rate of 5.75 % per annum to the maturity date.

The Notes became callable, in part or in whole, beginning August 2020.

The Notes have been structured to qualify for the Company as Tier 2 capital under regulatory guidelines.

The net proceeds were used for general corporate purposes, which included maintaining liquidity at the holding company, providing equity capital to the Bank to fund balance sheet growth and the Company's working capital needs.

The Notes were assigned an investment grade rating of BBB by Kroll Bond Rating Agency, which was reaffirmed in the third quarter of 2019.

The Company recognized $ 0.4 million in interest expense related to its subordinated debt for each of the three month periods ended June 30, 2020 and 2019.

The Company recognized $ 0.7 million in interest expense related to its subordinated debt for each of the six month periods ended June 30, 2020 and 2019.

In the third quarter of 2020, the Notes were assigned an investment grade of BBB- by Kroll Bond Rating Agency.

The Company recognized $ 0.4 million in interest expense related to its subordinated debt for each of the three month periods ended September 30, 2020 and 2019.

The Company recognized $ 1.1 million in interest expense related to its subordinated debt for each of the nine month periods ended September 30, 2020 and 2019.

Subsequent Events

On July 28, 2020, the Company’s Board of Directors declared a $ 0.14 per share cash dividend, payable on August 24, 2020 to shareholders of record on August 14, 2020.

On October 28, 2020, the Company’s Board of Directors declared a $ 0.14 per share cash dividend, payable on November 23, 2020 to shareholders of record on November 13, 2020.

Subsequent to September 30, 2020, the Company has committed to permanently close its North Haven branch as of December 31, 2020.

In addition, the Company rolled out a Voluntary Early Retirement Incentive Plan.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements