What changed in this filing

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Item 1. Financial Statements

2022-05-06 compared with 2021-11-08 · 196 added, 326 removed, 869 unchanged (38% of the section changed)

3 unchanged sentences

(In thousands, except share data)

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Cash and due from banks $ 280,471 $ 291,598

4 unchanged sentences

Available for sale investment securities, at fair value 98,733 90,198

Held to maturity investment securities, at amortized cost (fair values of $ 18,360 and $ 20,032 at September 30, 2021 and December 31, 2020, respectively)

Held to maturity investment securities, at amortized cost (fair values of $ 16,338 and $ 18,445 at March 31, 2022 and December 31, 2021, respectively)

15,979 16,043

Total investment securities 116,802 108,409

Loans receivable (net of allowance for loan losses of $ 16,803 at September 30, 2021 and $ 21,009 at December 31, 2020)

Loans receivable (net of allowance for loan losses of $ 17,141 at March 31, 2022 and $ 16,902 at December 31, 2021)

1,964,567 1,875,167

4 unchanged sentences

Goodwill 2,589 2,589

Other intangible assets 48 76

Deferred income taxes, net 6,879 7,621

6 unchanged sentences

Advances from the Federal Home Loan Bank 50,000 50,000

Subordinated debentures (face value of $ 15,500 and $ 25,500 at September 30, 2021 and December 31, 2020, respectively, less unamortized debt issuance costs of $ 126 and $ 242 at September 30, 2021 and December 31, 2020, respectively)

Subordinated debentures (face value of $ 35,000 and $ 35,000 at March 31, 2022 and December 31, 2021, respectively, less unamortized debt issuance costs of $ 529 and $ 559 at March 31, 2022 and December 31, 2021, respectively)

34,471 34,441

4 unchanged sentences

Common stock, no par value;

10,000,000 shares authorized, 7,842,824 and 7,919,278 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

10,000,000 shares authorized, 7,761,338 and 7,803,166 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

114,882 118,148

7 unchanged sentences

(In thousands, except share data)

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

2021 2020 2021 2020

Three Months Ended March 31,

Interest and dividend income

14 unchanged sentences

Service charges and fees 240 199

Gain on sale of other real estate owned, net — 19 — 19

Other ( 173 ) 1,013

3 unchanged sentences

Occupancy and equipment 2,150 2,406

Data processing 632 529 1,977 1,558

Professional services 981 587

Data processing 654 512

Director fees 352 317

17 unchanged sentences

(In thousands)

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

2021 2020 2021 2020

Three Months Ended March 31,

Net income $ 8,212 $ 5,690

Other comprehensive income (loss):

Unrealized (losses) gains on securities:

Unrealized holding (losses) gains on available for sale securities ( 411 ) ( 97 ) ( 743 ) 2,661

Other comprehensive income:

Unrealized losses on securities:

Unrealized holding losses on available for sale securities ( 4,767 ) ( 1,025 )

Reclassification adjustment for gain realized in net income — —

Net change in unrealized (losses) gains ( 411 ) ( 97 ) ( 743 ) 2,661

Income tax benefit (expense) 92 21 162 ( 589 )

Unrealized (losses) gains on securities, net of tax ( 319 ) ( 76 ) ( 581 ) 2,072

Unrealized gains (losses) on interest rate swaps:

Unrealized gains (losses) on interest rate swaps 1,436 2,070 8,671 ( 16,400 )

Income tax (expense) benefit ( 321 ) ( 451 ) ( 1,918 ) 3,654

Unrealized gains (losses) on interest rate swaps, net of tax 1,115 1,619 6,753 ( 12,746 )

Total other comprehensive income (loss), net of tax 796 1,543 6,172 ( 10,674 )

Comprehensive income (loss) $ 7,651 $ 4,534 $ 24,944 $ ( 5,106 )

Net change in unrealized losses ( 4,767 ) ( 1,025 )

Income tax benefit 1,064 227

Unrealized losses on securities, net of tax ( 3,703 ) ( 798 )

Unrealized gains on interest rate swaps:

Unrealized gains on interest rate swaps 11,016 10,934

Income tax expense ( 2,461 ) ( 2,434 )

Unrealized gains on interest rate swaps, net of tax 8,555 8,500

Total other comprehensive income, net of tax 4,852 7,702

Comprehensive income $ 13,064 $ 13,392

See accompanying notes to consolidated financial statements (unaudited)

3 unchanged sentences

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

Balance at June 30, 2021 7,895,101 $ 120,451 $ 80,543 $ ( 10,199 ) $ 190,795

Net income — — 6,855 — 6,855

Other comprehensive income, net of tax — — — 796 796

Cash dividends declared ($ 0.18 per share)

— — ( 1,406 ) — ( 1,406 )

Stock-based compensation expense — 562 — — 562

Repurchase of common stock ( 52,277 ) ( 1,425 ) — — ( 1,425 )

Balance at September 30, 2021 7,842,824 $ 119,588 $ 85,992 $ ( 9,403 ) $ 196,177

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

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

Net income — — 2,991 — 2,991

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

Cash dividends declared ($ 0.14 per share)

— — ( 1,100 ) — ( 1,100 )

Stock-based compensation expense — 473 — — 473

Issuance of restricted stock 9,000 — — — —

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

See accompanying notes to consolidated financial statements (unaudited)

Bankwell Financial Group, Inc.

Consolidated Statements of Shareholders' Equity – (continued)

(In thousands, except share data)

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

Balance at December 31, 2021 7,803,166 $ 118,148 $ 92,400 $ ( 8,561 ) $ 201,987

4 unchanged sentences

Stock-based compensation expense — 541 — — 541

Forfeitures of restricted stock ( 150 ) — — — —

Issuance of restricted stock 69,001 — — — —

1 unchanged sentence

Repurchase of common stock ( 112,829 ) ( 3,837 ) — — ( 3,837 )

Balance at September 30, 2021 7,842,824 $ 119,588 $ 85,992 $ ( 9,403 ) $ 196,177

Balance at March 31, 2022 7,761,338 $ 114,882 $ 99,047 $ ( 3,709 ) $ 210,220

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

1 unchanged sentence

Net income — — 5,690 — 5,690

Other comprehensive loss, net of tax — — — ( 10,674 ) ( 10,674 )

Other comprehensive income, net of tax — — — 7,702 7,702

Cash dividends declared ($ 0.14 per share)

5 unchanged sentences

Repurchase of common stock ( 65,626 ) ( 1,424 ) — — ( 1,424 )

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

Balance at March 31, 2021 7,908,630 $ 120,398 $ 75,418 $ ( 7,873 ) $ 187,943

See accompanying notes to consolidated financial statements (unaudited)

2 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities

Net income $ 8,212 $ 5,690

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Net amortization of premiums and discounts on investment securities 90 30

(Credit) provision for loan losses ( 182 ) 6,896

Provision (credit) for deferred income taxes 1,827 ( 2,353 )

Provision (credit) for loan losses 229 ( 296 )

(Credit) provision for deferred income taxes ( 303 ) 185

Change in fair value of marketable equity securities 85 36

1 unchanged sentence

Amortization of debt issuance costs 30 13

Change in valuation allowance of right-of-use asset ( 280 ) —

Increase in cash surrender value of bank-owned life insurance ( 260 ) ( 231 )

3 unchanged sentences

Loss on sale of premises and equipment — 6

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

Net change in:

3 unchanged sentences

Accrued expenses and other liabilities ( 849 ) ( 181 )

Net cash provided by (used in) operating activities 30,152 ( 8,495 )

Net cash provided by operating activities 22,001 16,694

Cash flows from investing activities

1 unchanged sentence

Proceeds from principal repayments on held to maturity securities 66 4,592

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

Purchases of marketable equity securities ( 7 ) ( 7 )

1 unchanged sentence

Purchases of held to maturity securities — ( 4,736 )

Purchases of bank-owned life insurance ( 5,500 ) —

Net increase in loans ( 96,076 ) ( 51,723 )

Loan principal sold from loans not originated for sale ( 17,122 ) ( 214 )

Proceeds from sales of loans not originated for sale 6,268 4,480

Purchases of premises and equipment, net ( 825 ) ( 2,646 )

Reduction (purchase) of Federal Home Loan Bank stock 4,228 ( 385 )

Proceeds from the sale of other real estate owned — 199

(Purchase) reduction of Federal Home Loan Bank stock ( 56 ) 1,414

Net cash used in investing activities ( 104,024 ) ( 44,297 )

3 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from financing activities

2 unchanged sentences

Net change in FHLB advances — ( 50,000 )

Repayment of subordinated debt ( 10,000 ) —

Proceeds from exercise of options 30 53

1 unchanged sentence

Repurchase of common stock ( 3,837 ) ( 1,424 )

Net cash (used in) provided by financing activities ( 56,280 ) 296,315

Net (decrease) increase in cash and cash equivalents ( 232,084 ) 261,432

Net cash provided by (used in) financing activities 36,834 ( 19,990 )

Net decrease in cash and cash equivalents ( 45,189 ) ( 47,593 )

Cash and cash equivalents:

6 unchanged sentences

Noncash investing and financing activities:

Loans transferred to other real estate owned $ — $ 180

Net change in unrealized gains or losses on available for sale securities ( 4,767 ) ( 1,025 )

1 unchanged sentence

Establishment of right-of-use asset and lease liability — 9,775

Transfer of loans from held-for-investment to held-for-sale 5,637 3,967

See accompanying notes to consolidated financial statements (unaudited)

4 unchanged sentences

The Bank is a Connecticut state chartered commercial bank, founded in 2002, whose deposits are insured under the Deposit Insurance Fund administered by the Federal Deposit Insurance Corporation (“FDIC”).

The Bank provides a wide range of services to customers in our primary market, an area encompassing approximately a 100 mile radius around our branch network.

In addition, the Bank pursues certain types of commercial lending opportunities outside our primary market, particularly where we have strong relationships.

The Bank provides commercial lending services through a variety of fixed and floating rate products in Connecticut and surrounding markets.

Such services are also provided to certain industries across several regions of the United States, primarily with borrowers with whom the Company has existing relationships.

The Bank operates branches in New Canaan, Stamford, Fairfield, Wilton, Westport, Darien, Norwalk, and Hamden, Connecticut.

7 unchanged sentences

Material estimates that are particularly susceptible to significant change in the near term relate to the allowance for loan losses, the valuation of derivative instruments, investment securities valuation, evaluation of investment securities for other than temporary impairment and deferred income taxes valuation.

The COVID-19 pandemic has resulted in significant economic disruption affecting our business and the clients we serve.

As vaccination efforts continue, restrictions on businesses have been lifted and a return to more normal economic activity has begun.

However, a significant degree of uncertainty still exists concerning the ultimate duration and magnitude of the COVID-19 pandemic and subsequent outbreaks, including whether restrictions that have been lifted will need to be imposed again or tightened in the future.

Given the ongoing and dynamic nature of the circumstances, it is still difficult to predict the full impact of the COVID-19 pandemic on our business.

The extent of such impact will depend on future developments, including but not limited to the continued roll-out of vaccinations, which play an important role as to when the coronavirus can be controlled and abated.

Basis of consolidated financial statement presentation

19 unchanged sentences

2022-02, Financial Instruments—Credit Losses (Topic 326):

"Troubled Debt Restructurings and Vintage Disclosures.” This ASU eliminates the TDR recognition and measurement guidance and, instead, requires that an entity evaluate (consistent with the accounting for other loan modifications) whether a modification represents a new loan or a continuation of an existing loan.

In addition, this ASU enhances existing disclosure requirements and introduces new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty.

For public business entities, this ASU requires that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20.

Gross write-off information must be included in the vintage disclosures required for public business entities in accordance with paragraph 326-20-50-6, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination.

For entities that have adopted the amendments in update 2016-13, the amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

For entities that have not yet adopted the amendments in update 2016-13, the effective dates for the amendments in this update are the same as the effective dates in Update 2016-13.

The Company has not yet adopted this accounting standard as ASU 2016-13 has not been adopted.

Management continues to evaluate the impact of its future adoption of this guidance on the Company’s financial statements.

2016-13, Financial Instruments—Credit Losses (Topic 326):

“Measurement of Credit Losses on Financial Instruments.” This ASU changes the impairment model for most financial assets and certain other instruments.

6 unchanged sentences

2019-10, which officially delayed the adoption of this standard for smaller reporting companies until fiscal years beginning after December 15, 2022.

The Company does qualify to defer the adoption of this standard and has not yet adopted this standard.

The Company qualifies to defer the adoption of this standard and has not yet adopted this standard.

Management continues to evaluate the impact of its future adoption of this guidance on the Company’s financial statements.

12 unchanged sentences

2019-10, which officially delayed the adoption of this standard for smaller reporting companies until fiscal years beginning after December 15, 2022.

The Company does qualify to defer the adoption of this standard and has not yet adopted this standard.

The Company qualifies to defer the adoption of this standard and has not yet adopted this standard.

The Company does not expect the application of this guidance to have a material impact on the Company’s financial statements.

Recently adopted accounting pronouncements

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.

In particular, the Company made the following elections as it relates to hedging relationships;

(1) Option to not reassess a previous accounting determination (paragraph 848-20-35-2);

(2) Option to not dedesignate a hedging relationship due to a change in critical term (paragraph 848-20-35-3);

(3) Option to change the contractual terms of a hedging instrument, hedged item, or forecasted transaction and to not dedesignate a hedging relationship (paragraph 848-30-25-5);

(4) Adopt expedient ASC 848-50-25-2 to assert probability of the hedged interest regardless of any expected modification in terms related to reference rate reform;

and (5) To continue the method of assessing effectiveness as documented in the original hedge documentation and apply the expedient in ASC 848-50-35-17 so that the reference rate on the hypothetical derivative matches the reference rate on the hedging instrument.

For new hedging relationships designated subsequent to December 31, 2020, the Company elects to apply the expedient in ASC 848-50-25-11 to assume that the reference rate will not be replaced for the remainder of the hedging relationship.

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 September 30, 2021 were as follows:

September 30, 2021

The amortized cost, gross unrealized gains and losses and fair value of available for sale and held to maturity securities at March 31, 2022 were as follows:

March 31, 2022

Amortized Cost Gross Unrealized Fair Value

2 unchanged sentences

Government and agency obligations

Less than one year $ 9,995 $ 32 $ — $ 10,027

Due from one through five years $ 40,944 $ — $ ( 1,887 ) $ 39,057

3 unchanged sentences

Corporate bonds

Due from one through five years 1,000 17 — 1,017

Due from five through ten years 14,000 90 ( 253 ) 13,837

14 unchanged sentences

Government and agency obligations

Less than one year $ 9,976 $ 172 $ — $ 10,148

Due from one through five years $ 25,747 $ 3 $ ( 181 ) $ 25,569

Due from five through ten years 16,540 866 — 17,406

2 unchanged sentences

Corporate bonds

Due from one through five years 4,000 57 — 4,057

Due from five through ten years 13,000 429 ( 10 ) 13,419

8 unchanged sentences

Total held to maturity securities $ 16,043 $ 2,608 $ ( 206 ) $ 18,445

There were no sales of investment securities during the three or nine months ended September 30, 2021 or 2020.

At September 30, 2021 and December 31, 2020, 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, 2021 and December 31, 2020, the actual durations of the Company's available for sale securities were significantly shorter than the stated maturities.

As of September 30, 2021, 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 months ended March 31, 2022 or 2021.

At March 31, 2022 and December 31, 2021, none of the Company's securities were pledged as collateral with the Federal Home Loan Bank ("FHLB") or any other institution.

As of March 31, 2022 and December 31, 2021, the actual durations of the Company's available for sale securities were significantly shorter than the stated maturities.

As of March 31, 2022, the Company held marketable equity securities with a fair value of $ 2.1 million and an amortized cost of $ 2.1 million.

At December 31, 2021, the Company held marketable equity securities with a fair value of $ 2.2 million and an amortized cost of $ 2.1 million.

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

There were no investment securities as of December 31, 2020, 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 September 30, 2021:

Length of Time in Continuous Unrealized Loss Position

5 unchanged sentences

(Dollars in thousands)

September 30, 2021

March 31, 2022

Government and agency obligations $ 79,507 $ ( 2,558 ) 3.12 % $ — $ — — % $ 79,507 $ ( 2,558 ) 3.12 %

Corporate bonds 9,747 ( 253 ) 2.53 — — — 9,747 ( 253 ) 2.53

State agency and municipal obligations — — — 3,971 ( 663 ) 14.30 3,971 ( 663 ) 14.30

Total investment securities $ 89,254 $ ( 2,811 ) 3.05 % $ 3,971 $ ( 663 ) 14.30 % $ 93,225 $ ( 3,474 ) 3.59 %

There were three investment securities as of September 30, 2021, in which the fair value of the security was less than the amortized cost of the security.

Length of Time in Continuous Unrealized Loss Position

Less Than 12 Months 12 Months or More Total

Fair Value Unrealized

Amortized Cost Fair Value Unrealized

Amortized Cost

(Dollars in thousands)

December 31, 2021

Government and agency obligations $ 28,121 $ ( 239 ) 0.84 % $ — $ — — % $ 28,121 $ ( 239 ) 0.84 %

Corporate bonds 2,990 ( 10 ) 0.35 — — — 2,990 ( 10 ) 0.35

State agency and municipal obligations 4,443 ( 206 ) 4.44 — — — 4,443 ( 206 ) 4.44

Total investment securities $ 35,554 $ ( 455 ) 1.27 % $ — $ — — % $ 35,554 $ ( 455 ) 1.27 %

There were twenty-two and seven investment securities as of March 31, 2022 and December 31, 2021, respectively, in which the fair value of the security was less than the amortized cost of the security.

Government and agency obligations owned are either direct obligations of the U.S.

1 unchanged sentence

Government, therefore the contractual cash flows are guaranteed and as a result the unrealized losses in this portfolio are considered to be only temporarily impaired.

The Company continually monitors its state agency and municipal bond portfolios and at this time these portfolios have minimal default risk because state agency and municipal bonds are all rated investment grade or deemed to be of investment grade quality.

The Company has the intent and ability to retain its investment securities in an unrealized loss position at September 30, 2021 until the decline in value has recovered or the security has matured.

The Company continually monitors its corporate bond, state agency and municipal bond portfolios and at this time these portfolios have minimal default risk because state agency and municipal bonds are all rated investment grade or deemed to be of investment grade quality.

The Company has the intent and ability to retain its investment securities in an unrealized loss position at March 31, 2022 until the decline in value has recovered or the security has matured.

Loans Receivable and Allowance for Loan Losses

The following table sets forth a summary of the loan portfolio at September 30, 2021 and December 31, 2020:

(In thousands) September 30, 2021 December 31, 2020

The following table sets forth a summary of the loan portfolio at March 31, 2022 and December 31, 2021:

(In thousands) March 31, 2022 December 31, 2021

Real estate loans:

10 unchanged sentences

Loans receivable, net $ 1,964,567 $ 1,875,167

(1) The September 30, 2021 and December 31, 2020 balance includes $ 1.6 million and $ 34.8 million, respectively, of Paycheck Protection Program ("PPP") loans made under the CARES Act.

(1) The March 31, 2022 and December 31, 2021 balances include $ 0.1 million and $ 0.2 million, respectively, of Paycheck Protection Program ("PPP") loans made under the CARES Act.

Lending activities 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 nine months ended September 30, 2021 and 2020, by portfolio segment:

Residential Real Estate Commercial Real Estate Construction Commercial Business Consumer Total

(In thousands)

Three Months Ended September 30, 2021

Beginning balance $ 318 $ 13,209 $ 133 $ 2,976 $ 36 $ 16,672

Charge-offs — — — — ( 15 ) ( 15 )

Recoveries — — — 11 1 12

Provisions (credits) 158 37 9 ( 84 ) 14 134

Ending balance $ 476 $ 13,246 $ 142 $ 2,903 $ 36 $ 16,803

Residential Real Estate Commercial Real Estate Construction Commercial Business Consumer Total

(In thousands)

Three Months Ended September 30, 2020

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

Charge-offs — — — — ( 4 ) ( 4 )

Recoveries — — — — 2 2

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

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

The following tables set forth the activity in the Company’s allowance for loan losses for the three months ended March 31, 2022 and 2021, by portfolio segment:

Residential Real Estate Commercial Real Estate Construction Commercial Business Consumer Total

(In thousands)

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Beginning balance $ 504 $ 12,751 $ 4 $ 3,590 $ 53 $ 16,902

5 unchanged sentences

(In thousands)

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Beginning balance $ 610 $ 16,425 $ 221 $ 3,753 $ — $ 21,009

3 unchanged sentences

Ending balance $ 501 $ 16,259 $ 297 $ 3,452 $ 36 $ 20,545

Loans evaluated for impairment and the related allowance for loan losses as of September 30, 2021 and December 31, 2020 were as follows:

Loans evaluated for impairment and the related allowance for loan losses as of March 31, 2022 and December 31, 2021 were as follows:

Portfolio Allowance

(In thousands)

September 30, 2021

March 31, 2022

Loans individually evaluated for impairment:

29 unchanged sentences

Total $ 1,894,881 $ 16,902

As of December 31, 2020, $ 57.7 million of loans were individually evaluated for impairment and $ 10.0 million of these loans were determined not impaired.

Credit quality indicators

14 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 September 30, 2021 and December 31, 2020:

The following tables present credit risk ratings by loan segment as of March 31, 2022 and December 31, 2021:

Commercial Credit Quality Indicators

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

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

7 unchanged sentences

Residential and Consumer Credit Quality Indicators

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Residential Real Estate Consumer Total Residential Real Estate Consumer Total

16 unchanged sentences

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.

As of September 30, 2021, no loans remained on active deferral under the CARES Act.

The following tables set forth certain information with respect to the Company's loan portfolio delinquencies by portfolio segment as of September 30, 2021 and December 31, 2020:

September 30, 2021

As of March 31, 2022, no loans remained on active deferral under the CARES Act.

The following tables set forth certain information with respect to the Company's loan portfolio delinquencies by portfolio segment as of March 31, 2022 and December 31, 2021:

March 31, 2022

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 $ 5,054 $ 11,986 $ 15,588 $ 32,628 $ 1,862,253 $ 1,894,881

There were no loans delinquent greater than 90 days and still accruing interest as of September 30, 2021 and December 31, 2020.

There was one loan, totaling $ 0.3 million, delinquent greater than 90 days and still accruing interest as of March 31, 2022.

The delinquency for this particular loan was a result of a closing delay.

There were two loans, totaling $ 1.1 million, delinquent greater than 90 days and still accruing interest as of December 31, 2021.

The delinquencies for these particular loans was a result of an administrative delay.

Loans on nonaccrual status

The following is a summary of nonaccrual loans by portfolio segment as of September 30, 2021 and December 31, 2020:

September 30, 2021 December 31, 2020

The following is a summary of nonaccrual loans by portfolio segment as of March 31, 2022 and December 31, 2021:

March 31, 2022 December 31, 2021

(In thousands)

4 unchanged sentences

Total $ 15,745 $ 16,587

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, 2021 and 2020 was $ 0.9 million and $ 0.6 million, respectively.

There was $ 49 thousand and no interest income recognized on these loans for the nine months ended September 30, 2021 and 2020, respectively.

At September 30, 2021 and December 31, 2020, there were no commitments to lend additional funds to any borrower on nonaccrual status.

Nonaccrual loans with no specific reserve totaled $ 16.1 million and $ 17.5 million at September 30, 2021 and December 31, 2020, respectively, as these loans were deemed to be adequately collateralized.

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 three months ended March 31, 2022 and 2021 was $ 0.2 million and $ 0.4 million, respectively.

There was no interest income recognized on these loans for the three months ended March 31, 2022 and 2021.

At March 31, 2022 and December 31, 2021, there were no commitments to lend additional funds to any borrower on nonaccrual status.

Nonaccrual loans with no specific reserve totaled $ 13.4 million and $ 14.2 million at March 31, 2022 and December 31, 2021, respectively, as these loans were deemed to be adequately collateralized.

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 September 30, 2021 and December 31, 2020:

The following table summarizes impaired loans by portfolio segment as of March 31, 2022 and December 31, 2021:

Carrying Amount Unpaid Principal Balance Associated Allowance

September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021 March 31, 2022 December 31, 2021 March 31, 2022 December 31, 2021

(In thousands)

11 unchanged sentences

Total impaired loans $ 45,931 $ 47,181 $ 46,880 $ 48,415 $ 2,782 $ 2,868

The following tables summarize 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, 2021 and 2020:

Average Carrying Amount Interest Income Recognized

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

2021 2020 2021 2020

(In thousands)

Impaired loans without a valuation allowance:

Residential real estate $ 3,058 $ 4,035 $ 13 $ 16

Commercial real estate 10,153 7,376 72 37

Commercial business 1,987 4,123 5 5

Construction 8,997 — — —

Total impaired loans without a valuation allowance 24,195 15,534 90 58

Impaired loans with a valuation allowance:

Residential real estate $ 1,775 $ — $ 12 $ —

Commercial real estate 20,301 6,259 62 78

Commercial business 2,763 30 18 —

Total impaired loans with a valuation allowance 24,839 6,289 92 78

Total impaired loans $ 49,034 $ 21,823 $ 182 $ 136

The following tables summarize the average carrying amount of impaired loans and interest income recognized on impaired loans by portfolio segment for the three months ended March 31, 2022 and 2021:

Average Carrying Amount Interest Income Recognized

Nine Months Ended

September 30, Nine Months Ended

September 30,

Three Months Ended March 31, Three Months Ended March 31,

2022 2021 2022 2021

20 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 $ 26.9 million at September 30, 2021 and $ 9.1 million at December 31, 2020.

Loans classified as TDRs totaled $ 25.3 million at March 31, 2022 and $ 25.8 million at December 31, 2021.

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) 2021 2020 2021 2020 2021 2020

Three Months Ended September 30,

Commercial real estate 1 — $ 10,317 $ — $ 10,402 $ —

Total 1 — $ 10,317 $ — $ 10,402 $ —

There were no loans modified as TDRs during the three months ended March 31, 2022.

Number of Loans Pre-Modification Post-Modification

(Dollars in thousands) 2022 2021 2022 2021 2022 2021

Nine Months Ended September 30,

Three Months Ended March 31,

Residential real estate — 1 $ — $ 631 $ — $ 631

Commercial business 1 — 2,567 — 2,655 —

Commercial real estate 2 — 13,534 — 13,570 —

Total — 1 $ — $ 631 $ — $ 631

At September 30, 2021 and December 31, 2020, there were five nonaccrual loans identified as TDRs totaling $ 12.4 million and three nonaccrual loans identified as TDRs totaling $ 1.4 million, respectively.

There were no loans modified in a troubled debt restructuring that re-defaulted during the nine months ended September 30, 2021 and September 30, 2020.

The following table provides information on how loans were modified as TDRs during the three and nine months ended September 30, 2021 and September 30, 2020.

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

2021 2020 2021 2020

At March 31, 2022 and December 31, 2021, there were five nonaccrual loans identified as TDRs totaling $ 1.9 million and five nonaccrual loans identified as TDRs totaling $ 2.0 million, respectively.

There were no loans modified in a troubled debt restructuring that re-defaulted during the three months ended March 31, 2022 and March 31, 2021.

The following table provides information on how loans were modified as TDRs during the three months ended March 31, 2022 and March 31, 2021.

Three Months Ended March 31,

(In thousands)

Payment concession $ — $ 631

Maturity, rate and payment concession 10,402 — 13,057 —

Rate concession — — 3,168 —

Total $ — $ 631

2 unchanged sentences

Shareholders' Equity

The Company has 10,000,000 shares authorized and 7,842,824 shares issued and outstanding at September 30, 2021 and 10,000,000 shares authorized and 7,919,278 shares issued and outstanding at December 31, 2020.

The Company has 10,000,000 shares authorized and 7,761,338 shares issued and outstanding at March 31, 2022 and 10,000,000 shares authorized and 7,803,166 shares issued and outstanding at December 31, 2021.

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

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

The ability of the Company to pay dividends depends, in part, on the ability of the Bank to pay dividends to the Company.

The ability of the Company to pay dividends depends, in part, on the ability of the Bank to pay dividends to the Parent Corporation.

In accordance with Connecticut statutes, regulatory approval is required to pay dividends in excess of the Bank’s profits retained in the current year plus retained profits from the previous two years.

1 unchanged sentence

Issuer Purchases of Equity Securities

On December 19, 2018, the Company's Board of Directors authorized a share repurchase program of up to 400,000 shares of the Company's Common Stock.

On December 19, 2018, the Company's Board of Directors authorized a share repurchase program of up to 400,000 shares of the Company's Common Stock and, on October 27, 2021, the Company’ Board of Directors authorized the repurchase of an additional 200,000 shares under its share repurchase program.

The Company intends to accomplish the share repurchases through open market transactions, though the Company could accomplish repurchases through other means, such as privately negotiated transactions.

1 unchanged sentence

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 nine months ended September 30, 2021, the Company purchased 131,432 shares of its Common Stock at a weighted average price of $ 24.50 per share.

During the three months ended March 31, 2022, the Company purchased 112,829 shares of its Common Stock at a weighted average price of $ 34.01 per share.

During the year ended December 31, 2021, the Company purchased 190,770 shares of its Common Stock at a weighted average price of $ 26.62 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 nine months ended September 30, 2021 and September 30, 2020 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, 2021 and September 30, 2020:

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

(In thousands)

Balance at June 30, 2021 $ 2,482 $ ( 12,681 ) $ ( 10,199 )

Other comprehensive (loss) income before reclassifications, net of tax ( 319 ) 400 81

Amounts reclassified from accumulated other comprehensive income, net of tax — 715 715

Net other comprehensive (loss) income ( 319 ) 1,115 796

Balance at September 30, 2021 $ 2,163 $ ( 11,566 ) $ ( 9,403 )

The Company’s total comprehensive income or loss for the three months ended March 31, 2022 and March 31, 2021 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 months ended March 31, 2022 and March 31, 2021:

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

(In thousands)

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

Balance at December 31, 2021 $ 1,651 $ ( 10,212 ) $ ( 8,561 )

Other comprehensive (loss) income before reclassifications, net of tax ( 3,703 ) 7,901 4,198

1 unchanged sentence

Net other comprehensive (loss) income ( 3,703 ) 8,555 4,852

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

Balance at March 31, 2022 $ ( 2,052 ) $ ( 1,657 ) $ ( 3,709 )

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

4 unchanged sentences

Net other comprehensive (loss) income ( 798 ) 8,500 7,702

Balance at September 30, 2021 $ 2,163 $ ( 11,566 ) $ ( 9,403 )

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

(In thousands)

Balance at December 31, 2019 $ 928 $ ( 8,444 ) $ ( 7,516 )

Other comprehensive income (loss) before reclassifications, net of tax 2,072 ( 13,643 ) ( 11,571 )

Amounts reclassified from accumulated other comprehensive income, net of tax — 897 897

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

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

Balance at March 31, 2021 $ 1,946 $ ( 9,819 ) $ ( 7,873 )

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

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

2021 2020 2021 2020

Accumulated Other Comprehensive Income Components Three Months Ended March 31, Associated Line Item in the Consolidated Statements of Income

(In thousands)

11 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(In thousands, except per share data)

11 unchanged sentences

Diluted earnings per common share $ 1.04 $ 0.71

Awards excluded from the calculation of diluted EPS (3) :

Stock options — 15 — —

(1) Represents dividends paid and undistributed earnings allocated to unvested stock-based awards that contain non-forfeitable rights to dividends.

(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 purposes 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

1 unchanged sentence

banking organizations.

As of January 1, 2015, the Company and the Bank became subject to new capital rules set forth by the Federal Reserve, the FDIC and the other federal and state bank regulatory agencies.

The capital rules revise the banking agencies’ leverage and risk-based capital requirements and the method for calculating risk weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act (the Basel III Capital Rules).

The Basel III Capital Rules establish a minimum Common Equity Tier 1 capital requirement of 4.5 % of risk-weighted assets;

set the minimum leverage ratio at 4.0 % of total assets;

increased the minimum Tier 1 capital to risk-weighted assets requirement from 4.0 % to 6.0 %;

and retained the minimum total capital to risk weighted assets requirement at 8.0 %.

A “well-capitalized” institution must generally maintain capital ratios 100 - 200 basis points higher than the minimum guidelines.

The Basel III Capital Rules also change the risk weights assigned to certain assets.

The Basel III Capital Rules assigned a higher risk weight ( 150 %) to loans that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property.

The Basel III Capital Rules also alter the risk weighting for other assets, including marketable equity securities that are risk weighted generally at 300 %.

The Basel III Capital Rules require certain components of accumulated other comprehensive income (loss) to be included for purposes of calculating regulatory capital requirements unless a one-time opt-out is exercised.

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.

Under the current guidelines, banking organizations must have a minimum total risk-based capital ratio of 8.0 %, a minimum Tier 1 risk-based capital ratio of 6.0 %, a minimum Common Equity Tier 1 risk-based capital ratio of 4.5 %, and a minimum leverage ratio of 4.0 % in order to be "adequately capitalized." In addition to these requirements, banking organizations must maintain a capital conservation buffer consisting of common equity in an amount above the minimum risk-based capital requirements for “adequately capitalized” institutions equal to 2.5 % of total risk-weighted assets, resulting in a requirement for the Company and the Bank to effectively maintain Common Equity Tier 1, Tier 1 and total capital ratios of 7.0 %, 8.5 % and 10.5 %, respectively.

The Company and the Bank must maintain the capital conservation buffer to avoid restrictions on the ability to pay dividends, pay discretionary bonuses, or to engage in share repurchases.

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 September 30, 2021, the Bank and Company met all capital adequacy requirements to which they are subject.

As of March 31, 2022, 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 September 30, 2021 and December 31, 2020 were as follows:

The capital amounts and ratios for the Bank and the Company at March 31, 2022 and December 31, 2021 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

September 30, 2021

March 31, 2022

Common Equity Tier 1 Capital to Risk-Weighted Assets $ 241,346 11.20 % $ 150,824 7.00 % $ 140,050 6.50 %

3 unchanged sentences

Bankwell Financial Group, Inc.

September 30, 2021

March 31, 2022

Common Equity Tier 1 Capital to Risk-Weighted Assets $ 210,782 9.78 % $ 150,824 7.00 % N/A N/A

18 unchanged sentences

Regulatory Restrictions on Dividends

The ability of the Company to pay dividends depends, in part, on the ability of the Bank to pay dividends to the Company.

The ability of the Company to pay dividends depends, in part, on the ability of the Bank to pay dividends to the Parent Corporation.

1 unchanged sentence

Reserve Requirements on Cash

The Bank was not required to maintain a minimum reserve balance in the Federal Reserve Bank (FRB) at September 30, 2021 or December 31, 2020 as the FRB has waived this requirement due to the COVID-19 pandemic.

At September 30, 2021 and December 31, 2020, deposits consisted of the following:

September 30, 2021 December 31, 2020

The Bank was not required to maintain a minimum reserve balance in the Federal Reserve Bank (FRB) at March 31, 2022 or December 31, 2021 as the FRB has waived this requirement due to the COVID-19 pandemic.

At March 31, 2022 and December 31, 2021, deposits consisted of the following:

March 31, 2022 December 31, 2021

(In thousands)

7 unchanged sentences

Total deposits $ 2,166,204 $ 2,123,998

Maturities of time certificates of deposit as of September 30, 2021 and December 31, 2020 are summarized below:

September 30, 2021 December 31, 2020

Maturities of time certificates of deposit as of March 31, 2022 and December 31, 2021 are summarized below:

March 31, 2022 December 31, 2021

(In thousands)

4 unchanged sentences

Total $ 446,233 $ 457,258

The aggregate amount of individual certificate accounts, including brokered deposits with balances of $250,000 or more, was approximately $ 262.8 million at September 30, 2021 and $ 353.7 million at December 31, 2020.

Brokered certificates of deposits totaled $ 200.1 million at September 30, 2021 and $ 238.9 million at December 31, 2020.

There were no certificates of deposits from national listing services at September 30, 2021.

Certificates of deposits from national listing services totaled $ 18.4 million at December 31, 2020.

Brokered money market accounts totaled $ 104.0 million at September 30, 2021 and $ 13.5 million at December 31, 2020.

The following table summarizes interest expense on deposits by account type for the three and nine months ended September 30, 2021 and 2020:

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

2021 2020 2021 2020

The aggregate amount of individual certificate accounts, including brokered deposits with balances of $250,000 or more, was approximately $ 303.2 million at March 31, 2022 and $ 305.7 million at December 31, 2021.

Brokered certificates of deposits totaled $ 249.4 million at March 31, 2022 and $ 249.4 million at December 31, 2021.

There were no certificates of deposits from national listing services at March 31, 2022 or December 31, 2021.

Brokered money market accounts totaled $ 100.3 million at March 31, 2022 and $ 104.0 million at December 31, 2021.

The following table summarizes interest expense on deposits by account type for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

(In thousands)

6 unchanged sentences

Equity award plans

The Company has stock options or unvested restricted stock outstanding under three equity award plans, which are collectively referred to as the “Plan”.

The Company has stock options or unvested restricted stock outstanding under two equity award plans, which are collectively referred to as the “Plan”.

The current plan under which any future issuances of equity awards will be made is the 2012 BNC Financial Group, Inc.

2 unchanged sentences

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

At September 30, 2021, there were 561,901 shares reserved for future issuance under the 2012 Plan.

At March 31, 2022, there were 473,220 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 nine months ended September 30, 2021.

A summary of the status of outstanding stock options for the nine months ended September 30, 2021 is presented below:

Nine Months Ended September 30, 2021

There were no options granted during the three months ended March 31, 2022.

A summary of the status of outstanding stock options for the three months ended March 31, 2022 is presented below:

Three Months Ended March 31, 2022

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 nine months ended September 30, 2021 was $ 19 thousand.

The range of exercise prices for the 11,680 options exercisable at September 30, 2021 was $ 15.00 to $ 17.86 per share.

The weighted average remaining contractual life for these options was 1.4 years at September 30, 2021.

At September 30, 2021, as all awarded options have vested, all of the outstanding options are exercisable, and the aggregate intrinsic value of these options was $ 138 thousand.

The total intrinsic value of share options exercised during the three months ended March 31, 2022 was $ 39 thousand.

The exercise price for the 9,680 options exercisable at March 31, 2022 was $ 17.86 per share.

The weighted average remaining contractual life for these options was 1.1 years at March 31, 2022.

At March 31, 2022, as all awarded options have vested, all of the outstanding options are exercisable, and the aggregate intrinsic value of these options was $ 155 thousand.

Restricted Stock :

2 unchanged sentences

Restricted stock awards generally vest over one to five years .

The following table presents the activity for restricted stock for the nine months ended September 30, 2021:

Nine Months Ended September 30, 2021

The following table presents the activity for restricted stock for the three months ended March 31, 2022:

Three Months Ended March 31, 2022

Number of Shares Weighted Average Grant Date Fair Value

2 unchanged sentences

Vested ( 54,667 ) (3)

Forfeited ( 150 ) 33.02

Unvested at end of period 204,693 27.93

1 unchanged sentence

(2) Includes 20,905 shares of performance based restricted stock

The total fair value of restricted stock awards vested during the nine months ended September 30, 2021 was $ 0.8 million.

The Company's restricted stock expense for the nine months ended September 30, 2021 and September 30, 2020 was $ 1.4 million and $ 1.3 million, respectively.

At September 30, 2021, there was $ 3.0 million of unrecognized stock compensation expense for restricted stock, expected to be recognized over a weighted average period of 1.7 years.

(3) Includes 13,798 shares of performance based restricted stock

The total fair value of restricted stock awards vested during the three months ended March 31, 2022 was $ 1.8 million.

The Company's restricted stock expense for the three months ended March 31, 2022 and March 31, 2021 was $ 0.5 million and $ 0.4 million, respectively.

At March 31, 2022, there was $ 4.9 million of unrecognized stock compensation expense for restricted stock, expected to be recognized over a weighted average period of 1.8 years.

Performance Based Restricted Stock :

The Company has 32,662 shares of performance based restricted stock outstanding as of September 30, 2021 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.

The Company has 36,569 shares of performance based restricted stock outstanding as of March 31, 2022 pursuant to the Company’s 2012 Stock Plan.

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

The share quantity that ultimately vests can range between 0 % and 200 %, which is dependent on the degree to which the performance metrics are met.

3 unchanged sentences

The Company does not use derivatives for speculative purposes.

As of September 30, 2021, the Company was a party to eight interest rate swaps, designated as hedging instruments, to add stability to interest expense and to manage its exposure to the variability of the future cash flows attributable to the contractually specified interest rates.

As of March 31, 2022, the Company was a party to eight interest rate swaps, designated as hedging instruments, to add stability to interest expense and to manage its exposure to the variability of the future cash flows attributable to the contractually specified interest rates.

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.

As of September 30, 2021, 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 March 31, 2022, 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 September 30, 2021 and December 31, 2020 is as follows:

As of September 30, 2021

Information about derivative instruments at March 31, 2022 and December 31, 2021 is as follows:

As of March 31, 2022

Derivative Assets Derivative Liabilities

Notional Amount Balance Sheet Location Fair Value Notional Amount Balance Sheet Location Fair Value

Original Notional Amount Balance Sheet Location Fair Value Original Notional Amount Balance Sheet Location Fair Value

(In thousands)

5 unchanged sentences

(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 September 30, 2021 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 $ 15.5 million as of September 30, 2021.

Accrued interest payable related to interest rate swaps as of March 31, 2022 totaled $ 0.5 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 $ 2.6 million as of March 31, 2022.

As of December 31, 2021

Derivative Assets Derivative Liabilities

Notional Amount Balance Sheet Location Fair Value Notional Amount Balance Sheet Location Fair Value

Original Notional Amount Balance Sheet Location Fair Value Original Notional Amount Balance Sheet Location Fair Value

(In thousands)

12 unchanged sentences

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

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, 2021 and September 30, 2020:

Three Months Ended September 30, Nine Months Ended September 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 months ended March 31, 2022 and March 31, 2021:

Three Months Ended March 31,

(In thousands) 2022 2021

Interest rate swaps designated as cash flow hedges:

Unrealized gain (loss) recognized in accumulated other comprehensive income before reclassifications $ 515 $ 1,249 $ 5,875 $ ( 17,554 )

Unrealized gain recognized in accumulated other comprehensive income before reclassifications $ 10,174 $ 10,011

Amounts reclassified from accumulated other comprehensive income 842 923

Income tax (expense) benefit on items recognized in accumulated other comprehensive income ( 321 ) ( 451 ) ( 1,918 ) 3,654

Other comprehensive income (loss) $ 1,115 $ 1,619 $ 6,753 $ ( 12,746 )

Income tax expense on items recognized in accumulated other comprehensive income ( 2,461 ) ( 2,434 )

Other comprehensive income $ 8,555 $ 8,500

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 September 30, 2021 and December 31, 2020:

September 30, 2021

The following tables summarize gross and net information about derivative instruments that are offset in the Consolidated Balance Sheets at March 31, 2022 and December 31, 2021:

March 31, 2022

(In thousands)

4 unchanged sentences

(1) Includes accrued interest payable totaling $ 89 thousand.

September 30, 2021

March 31, 2022

(In thousands)

10 unchanged sentences

Derivative Assets $ 3,604 $ — $ 3,604 $ 217 $ — $ 3,387

(1) Includes accrued interest receivable totaling $ 40 thousand.

(1) Includes accrued interest payable totaling $ 24 thousand.

December 31, 2021

21 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 September 30, 2021 and December 31, 2020 were as follows:

September 30, 2021

The carrying values, fair values and placement in the fair value hierarchy of the Company's financial instruments at March 31, 2022 and December 31, 2021 were as follows:

March 31, 2022

Carrying Value Fair Value Level 1 Level 2 Level 3

48 unchanged sentences

The following methods and assumptions were used by management in estimating the fair value of its financial instruments:

Cash and due from banks, federal funds sold, accrued interest receivable and accrued interest payable:

The carrying amount is a reasonable estimate of fair value.

Marketable equity securities, available for sale securities and held to maturity securities:

Marketable equity securities and available for sale securities:

Fair values are based on quoted market prices or dealer quotes, if available.

3 unchanged sentences

treasury notes and in marketable equity securities for which a quoted price is readily available in the market.

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 3.3 % to 4.7 % as of September 30, 2021 and 2.9 % to 3.3 % as of December 31, 2020.

These securities are CRA eligible investments.

The carrying value of FHLB stock approximates fair value based on the most recent redemption provisions of the FHLB.

Loans receivable:

For variable rate loans which reprice frequently and have no significant change in credit risk, fair values are based on carrying values.

The fair value of fixed rate loans are estimated by discounting the future cash flows using the rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

The fair value methodology includes prepayment, default and loss severity assumptions applied by the type of loan.

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

Derivative asset (liability):

9 unchanged sentences

The Company estimates the fair value of servicing assets and liabilities using discounted cash flow models, incorporating numerous assumptions from the perspective of a market participant, including market discount rates.

The fair value of demand deposits, regular savings and certain money market deposits is the amount payable on demand at the reporting date.

The fair value of certificates of deposit and other time deposits is estimated using a discounted cash flow calculation that applies interest rates currently being offered for deposits of similar remaining maturities to a schedule of aggregated expected maturities on such deposits.

Borrowings and Subordinated Debentures:

The fair value of the Company’s borrowings and subordinated debentures is estimated using a discounted cash flow calculation that applies discount rates currently offered based on similar maturities.

The Company also considers its own creditworthiness in determining the fair value of its borrowings and subordinated debt.

Contractual cash flows for the subordinated debt are reduced based on the estimated rates of default, the severity of losses to be incurred on a default, and the rates at which the subordinated debt is expected to prepay after the call date.

Off-balance-sheet instruments:

Loan commitments on which the committed interest rate is less than the current market rate are insignificant at September 30, 2021 and December 31, 2020.

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 September 30, 2021 and December 31, 2020, 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, 2021 and for the year ended December 31, 2020.

The following table details the financial instruments carried at fair value on a recurring basis at March 31, 2022 and December 31, 2021, 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 three months ended March 31, 2022 and for the year ended December 31, 2021.

(In thousands) Level 1 Level 2 Level 3

September 30, 2021:

March 31, 2022:

Marketable equity securities $ 2,090 $ — $ —

22 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 September 30, 2021 and December 31, 2020, 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 March 31, 2022 and December 31, 2021, 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

September 30, 2021:

March 31, 2022:

Impaired loans $ — $ — $ 43,149

4 unchanged sentences

Assets held for sale — — 2,268

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, 2021 and December 31, 2020:

The following table presents information about quantitative inputs and assumptions for Level 3 financial instruments carried at fair value on a nonrecurring basis at March 31, 2022 and December 31, 2021:

Fair Value Valuation Methodology Unobservable Input Range

(Dollars in thousands)

September 30, 2021:

March 31, 2022:

Impaired loans $ 18,898 Appraisals Discount to appraised value 8.00 %

17 unchanged sentences

Such amounts are generally based on the fair value of the underlying collateral supporting the loan.

Collateral is typically valued using appraisals

or other indications of value based on recent comparable sales of similar properties or other assumptions.

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.

10 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 “2015 Notes”) to certain institutional investors.

The 2015 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 2015 Notes were non-callable for five years , had a stated maturity of August 15, 2025, and bore interest at a quarterly pay fixed rate of 5.75 % per annum to the maturity date.

The 2015 Notes became callable, in part or in whole, beginning August 2020.

On May 15, 2021, the Company repaid $ 10.0 million of the 2015 Notes.

The 2015 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.

In the third quarter of 2021, the 2015 Notes investment grade rating of BBB- was reaffirmed by Kroll Bond Rating Agency.

The Company recognized $ 0.2 million and $ 0.4 million in interest expense related to its subordinated debt for the three month periods ended September 30, 2021 and 2020, respectively.

The Company recognized $ 0.9 million and $ 1.1 million in interest expense related to its subordinated debt for the nine month periods ended September 30, 2021 and 2020, respectively.

On May 15, 2021, the Company repaid $ 10.0 million of the 2015 Notes and on November 15, 2021, the Company repaid the remaining $ 15.5 million of the 2015 Notes.

On October 14, 2021, the Company completed a private placement of a $ 35.0 million fixed-to-floating rate subordinated note (the “2021 Note”) to an institutional accredited investor.

The Company used the net proceeds to repay the 2015 Notes and intends to use the remaining proceeds for general corporate purposes.

The 2021 Note bears interest at a fixed rate of 3.25 % per year until October 14, 2026.

Thereafter, the interest rate will reset quarterly at a variable rate equal to the then current three-month term SOFR plus 233 basis points.

The 2021 Note has a stated maturity of October 15, 2031 and is non-callable for five years.

Beginning October 15, 2026, the Company may redeem the 2021 Note, in whole or in part, at its option.

The 2021 Note is not redeemable at the option of the holder.

The 2021 Note has been structured to qualify for the Company as Tier 2 capital under regulatory guidelines.

The Company incurred certain costs associated with the issuance of its subordinated debt.

The Company capitalized these costs and they have been presented within subordinated debentures on the consolidated balance sheets.

At March 31, 2022 and December 31, 2021, unamortized debt issuance costs were $ 0.5 million and $ 0.6 million, respectively.

Debt issuance costs amortize over the expected life of the related debt.

For the three months ended March 31, 2022 and 2021 the amortization expense for debt issuance costs were $ 30 thousand and $ 13 thousand, respectively, and were recognized as an increase to interest expense on borrowings within the consolidated statements of income.

The Company recognized $ 0.3 million and $ 0.4 million in interest expense related to its subordinated debt for the three month periods ended March 31, 2022 and 2021, respectively.

Subsequent Events

On October 14, 2021, the Company entered into a Subordinated Note Purchase Agreement with an institutional accredited investor, pursuant to which the Company issued and sold 3.25 % fixed-to-floating rate subordinated notes due 2031 (the “2021 Notes”) in the principal amount of $ 35.0 million.

The Company intends to use the net proceeds from the sale of the 2021 Notes for general corporate purposes, including, but not limited to, the repayment of $ 15.5 million of outstanding subordinated notes.

On October 14, 2021, the Company issued a notice of redemption of the outstanding 2015 Notes.

The notice calls for the redemption of the remaining $ 15.5 million aggregate principal amount of the 2015 Notes on November 15, 2021.

The redemption price for the 2015 Notes is 100 % of the principal amount redeemed, plus accrued and unpaid interest to, but not including, the redemption date.

On October 27, 2021, the Company’s Board of Directors declared an $ 0.18 per share cash dividend, payable on November 22, 2021 to shareholders of record on November 12, 2021.

In addition, the Company's Board of Directors authorized the repurchase of an additional 200,000 shares under its existing share repurchase program.

On April 27, 2022, the Company’s Board of Directors declared a $ 0.20 per share cash dividend, payable on May 23, 2022 to shareholders of record on May 13, 2022.

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