What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-08 compared with 2022-03-08 · 171 added, 140 removed, 1588 unchanged (16% of the section changed)

46 unchanged sentences

• We tested the completeness and accuracy of data used by management in determining qualitative factor adjustments by agreeing them to internal and external source data.

• We assessed the reasonableness of management’s qualitative factor adjustments, including macro and local economic factors, nature and volume of loan portfolio, concentration of credit risk, net charge-off trends and non-accrual trends, and past due and classified loan trends by agreeing them to internal and external source data, evaluating the magnitude and directional consistency of such adjustments with prior periods and data points, and evaluating the consistency of such changes in accordance with the Company’s loan policy.

• We assessed the reasonableness of management’s qualitative factor adjustments by agreeing them to internal and external source data, evaluating the magnitude and directional consistency of such adjustments with prior periods and data points, and evaluating the consistency of such changes in accordance with the Company’s loan policy.

• We tested management’s conclusions regarding the appropriateness of the qualitative factor adjustments and agreed the impact to the allowance for loan losses calculation.

22 unchanged sentences

Goodwill 2,589 2,589

Other intangible assets — 76

Deferred income taxes, net 7,422 7,621

34 unchanged sentences

Net interest income 94,743 67,886

(Credit) provision for loan losses ( 57 ) 7,605

Net interest income after (credit) provision for loan losses 67,943 47,230

Provision (credit) provision for loan losses 5,437 ( 57 )

Net interest income after provision (credit) for loan losses 89,306 67,943

Noninterest income

2 unchanged sentences

Service charges and fees 1,072 872

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

Other ( 337 ) 1,070

50 unchanged sentences

Net income — — 26,586 — 26,586

Other comprehensive loss, net of tax — — — ( 8,059 ) ( 8,059 )

Other comprehensive income, net of tax — — — 7,014 7,014

Cash dividends declared ($ 0.64 per share)

23 unchanged sentences

Net income $ 37,429 $ 26,586

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 310 230

(Credit) provision for loan losses ( 57 ) 7,605

Provision (credit) for deferred income taxes 1,698 ( 3,516 )

Provision (credit) for loan losses 5,437 ( 57 )

(Credit) provision for deferred income taxes ( 1,964 ) 1,699

Change in fair value of marketable equity securities 212 63

Depreciation and amortization 3,366 3,583

Impairment of right-of-use asset — 280

Amortization of debt issuance costs 166 265

4 unchanged sentences

Net amortization of purchase accounting adjustments — 76

Loss on sale of premises and equipment 498 35

Gain on sale and write-downs of other real estate owned, net — ( 19 )

Write down of assets held for sale — 1,652

(Gain) loss on sale of premises and equipment ( 20 ) 498

Net change in:

3 unchanged sentences

Accrued expenses and other liabilities 20,940 ( 4,388 )

Net cash provided by (used in) operating activities 34,558 ( 1,512 )

Net cash provided by operating activities 82,668 34,558

Cash flows from investing activities

10 unchanged sentences

Disposals of premises and equipment, net ( 4,958 ) 4,257

Reduction (purchase) of Federal Home Loan Bank stock 5,046 ( 385 )

Proceeds from sale of other real estate owned — 199

(Purchase) reduction of Federal Home Loan Bank stock ( 2,402 ) 5,046

Net cash used in investing activities ( 811,161 ) ( 270,025 )

13 unchanged sentences

Net cash provided by financing activities 739,490 170,551

Net (decrease) increase in cash and cash equivalents ( 64,916 ) 331,547

Net increase (decrease) in cash and cash equivalents 10,997 ( 64,916 )

Cash and cash equivalents:

11 unchanged sentences

Establishment of right-of-use-asset and lease liability — 11,884

Transfer of Loans from held for-investment to held-for-sale 57,558 20,626

See Notes to Consolidated Financial Statements

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

Many of the Company's activities are with customers located in Connecticut and New York, with the majority of the Company's loans in Connecticut and some New York metro area counties.

Declines in property values in these areas could significantly impact the Company.

The Company has a significant concentration in commercial real estate loans.

The Bank provides a wide range of services to clients in our 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 market, particularly where we have strong relationships.

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

Principles of Consolidation

29 unchanged sentences

OTTI is required to be recognized regardless of the credit loss component if the Company intends to sell the security or if it is “more-likely-than-not” that the Company will be required to sell the security before recovery of its amortized cost basis.

The credit loss component of an other-than-temporary impairment write-down is recorded in earnings, while the remaining portion of the impairment loss is recognized in other comprehensive income (loss), provided the Company does not intend to sell the underlying debt security and it is more-likely-than-not that the Company will not be required to sell the debt security prior to recovery.

credit loss component of an other-than-temporary impairment write-down is recorded in earnings, while the remaining portion of the impairment loss is recognized in other comprehensive income (loss), provided the Company does not intend to sell the underlying debt security and it is more-likely-than-not that the Company will not be required to sell the debt security prior to recovery.

In determining whether a credit loss exists and the period over which the fair value of the debt security is expected to recover, management considers the following factors:

44 unchanged sentences

The decision to restructure a loan, versus aggressively enforcing the collection of the loan, may benefit the Company by increasing the ultimate probability of collection.

Section 4013 of the CARES Act permits a financial institution to elect to suspend troubled debt restructuring accounting, in certain circumstances, beginning March 1, 2020 and ending on the earlier of January 1, 2022, or sixty days after the national emergency concerning COVID-19 terminates.

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.

If a performing loan is restructured into a TDR it remains in performing status.

19 unchanged sentences

The Company subjects loans that do not meet the ASC 310-30 criteria to ASC Topic 450, “Contingencies”, by collectively evaluating these loans for an allowance for loan loss, using the same methodology as loans originated by the Company.

Acquired loans that met the criteria for nonaccrual of interest prior to the acquisition are considered performing upon acquisition, regardless of whether the customer is contractually delinquent, if the Company can reasonably estimate the timing and amount of the expected cash flows on such loans and if the Company expects to fully collect the new carrying value of the loans.

Acquired loans that met the criteria for nonaccrual of interest prior to the acquisition are considered performing upon acquisition, regardless of whether the client is contractually delinquent, if the Company can reasonably estimate the timing and amount of the expected cash flows on such loans and if the Company expects to fully collect the new carrying value of the loans.

As such, the Company may no longer consider the loan to be nonaccrual or nonperforming and may accrue interest on these loans, including the impact of any accretable yield.

37 unchanged sentences

Goodwill and identifiable intangible assets are evaluated for impairment annually or whenever events or changes in circumstances indicate the carrying value of these assets may not be recoverable.

When these assets are evaluated for impairment, if the carrying amount exceeds fair value, an impairment charge is recorded to income.

When these assets are

evaluated for impairment, if the carrying amount exceeds fair value, an impairment charge is recorded to income.

The fair value is based on observable market prices, when practicable.

98 unchanged sentences

The Company also has derivatives not designated as hedges.

Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain loan customers.

The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies.

Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain loan clients.

The Company executes interest rate swaps with commercial banking clients to facilitate their respective risk management strategies.

Those interest rate swaps are simultaneously hedged by offsetting derivatives that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions.

As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.

As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the client derivatives and the offsetting derivatives are recognized directly in earnings.

Related Party Transactions

Directors and officers of the Company and their affiliates have been customers of and have had transactions with the Company, and it is expected that such persons will continue to have such transactions in the future.

Management believes that all deposit accounts, loans, services and commitments comprising such transactions were made in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other customers who are not directors or officers.

Directors and officers of the Company and their affiliates have been clients of and have had transactions with the Company, and it is expected that such persons will continue to have such transactions in the future.

In the opinion of management, the transactions with related parties did not involve more than normal risks of collectability, nor favored treatment or terms, nor present other unfavorable features.

20 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.

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

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

On January 1, 2023, the Company adopted Topic 326.

Upon adoption of CECL, the Company will record a one-time cumulative effect, pre-tax adjustment in the range of $ 4.6 million to $ 5.6 million to the allowance for loan losses and a corresponding net of tax adjustment to beginning retained earnings.

The Company will also record a one-time cumulative effect, pre-tax adjustment in the range of $ 1.1 million to $ 1.4 million to the reserve for unfunded commitments (which is reflected in Accrued expenses and other liabilities on the Consolidated Balance Sheets) and a corresponding net of tax adjustment to beginning retained earnings.

These impacts will be reflected in the Company's first quarter 2023 financial statements.

The future impact of CECL on the Company’s allowance for credit losses and provision expense subsequent to the initial adoption will depend on refinements to key assumptions including forecasting and qualitative factors, as well as changes in the loan portfolio and economic conditions.

The Company measured its allowance under its current incurred loan loss model as of December 31, 2022.

In addition, the Company also evaluated its Held to maturity investment securities and Available for sale investment securities upon the adoption of the standard on January 1, 2023.

The Held to maturity investment securities are related to housing authority bonds in the towns of New Canaan and Stamford, CT.

The Company determined these housing authority bonds have a remote risk of loss based on the historical performance of housing authority bonds and the strong credit ratings of both the towns of New Canaan and Stamford, CT.

The Available for sale securities consist of government backed U.S.

Treasuries, Mortgage-Backed Securities, and Corporate Securities.

Treasuries and Mortgage-Backed Securities are guaranteed by the U.S.

Government and have a zero risk of loss.

The Corporate Securities include highly rated investment grade credits with minimal default risk.

As such, Management has concluded that no allowance for expected credit losses is required for the Held to maturity investment securities or the Available for sale investment securities upon adoption of the standard on January 1, 2023.

2017-04, Intangibles – Goodwill and Other (Topic 350):

10 unchanged sentences

The FASB issued ASU No.

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

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

2022-06, Reference Rate Reform (Topic 848) :

“Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.

The objective of the guidance in Topic 848 is to provide temporary relief during the transition period.

The Board included a sunset provision within Topic 848 based on expectations of when the London Interbank Offered Rate (LIBOR) would cease being published.

At the time that Update 2020-04 was issued, the UK Financial Conduct Authority (FCA) had established its intent that it would no longer be necessary to persuade, or compel, banks to submit to LIBOR after December 31, 2021.

As a result, the sunset provision was set for December 31, 2022 (12 months after the expected cessation date of all currencies and tenors of LIBOR).

In March 2021, the FCA announced that the intended cessation date of the overnight 1, 3, 6, and 12 month tenors of USD LIBOR would be June 30, 2023, which is beyond the current sunset date of Topic 848.

As the current relief in Topic 848 may not cover a period of time during which a significant number of modifications may take place, the amendments in this Update defer the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

Recently adopted accounting pronouncements

27 unchanged sentences

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 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.

D uring the year ended December 31, 2022, the Company purchased 166,375 shares of its Common Stock at a weighted average price of $ 33.30 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.

19 unchanged sentences

Core deposit intangible $ 1,029 $ 1,029 $ —

Amortization expense related to the core deposit intangible totaled $ 0.1 million for each of the years ended December 31, 2021 and 2020.

Amortization expense related to the core deposit intangible totaled $ 0.1 million for the year ended December 31, 2021.

There were no amortization expenses related to core deposit intangibles for the year ended December 31, 2022.

Investment Securities

26 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 years ended December 31, 2021 or December 31, 2020.

There we re no sales of i nvestment securities during the years ended December 31, 2022 or December 31, 2021.

At December 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.

3 unchanged sentences

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

There were seven investment securities as of December 31, 2021, 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 December 31, 2020.

There w ere thirty-six investment securities as of December 31, 2022, in which the fair value of the security was less than the amortized cost of the s ecurity.

There were seven such investment securities as of December 31, 2021.

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 December 31, 2022:

8 unchanged sentences

Corporate bonds 8,838 ( 1,162 ) 6.84 % 6,400 ( 600 ) 3.50 % 15,238 ( 1,762 ) 10.34 %

State agency and municipal

obligations 6,388 ( 85 ) 0.77 % 3,807 ( 779 ) 7.05 % 10,195 ( 864 ) 7.82 %

Total investment securities $ 70,669 $ ( 4,274 ) 3.46 % $ 43,189 $ ( 5,279 ) 4.28 % $ 113,858 $ ( 9,553 ) 7.74 %

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 ) 4.44 %

State agency and municipal obligations 4,443 ( 206 ) 4.44 % — — — % 4,443 ( 206 ) 0.35 %

21 unchanged sentences

Loans receivable, net $ 2,646,384 $ 1,875,167

(1) The December 31, 2021 and December 31, 2020 balance includes $ 0.2 million and $ 34.8 million, respectively, of Paycheck Protection Program ("PPP") loans made under the CARES Act.

(1) The December 31, 2022 and December 31, 2021 balances include $ 33 thousand 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.

3 unchanged sentences

The Company has established credit policies applicable to each type of lending activity in which it engages.

The Company evaluates the creditworthiness of each customer and extends credit of up to 80 % of the market value of the collateral, depending on the borrower's creditworthiness and the type of collateral.

The Company evaluates the creditworthiness of each client and extends credit of up to 80 % of the market value of the collateral, depending on the borrower's creditworthiness and the type of collateral.

The borrower’s ability to service the debt is monitored on an ongoing basis.

3 unchanged sentences

In the fourth quarter of 2017 management made the strategic decision to no longer originate residential mortgage loans.

As of the beginning of the third quarter of 2019, the Company no longer offered home equity loans or lines of credit.

Commencing with third quarter of 2019, the Company no longer offers home equity loans or lines of credit.

The Company’s policy for residential lending generally required that the amount of the loan may not exceed 80 % of the original appraised value of the property.

85 unchanged sentences

Total $ 1,894,881 $ 16,902

As of December 31, 2020, of the $ 57.7 million of loans individually evaluated for impairment a total of $ 10.0 million of these loans were determined to not be impaired.

Credit quality indicators

To measure credit risk for the loan portfolios, the Company employs a credit risk rating system.

This risk rating represents an assessed level of the loan’s risk based on the character and creditworthiness of the borrower/guarantor, the capacity of the

borrower to adequately service the debt, any credit enhancements or additional sources of repayment, and the quality, value and coverage of the collateral, if any.

The objectives of the Company’s risk rating system are to provide the Board of Directors and senior management with an objective assessment of the overall quality of the loan portfolio, to promptly and accurately identify loans with well-defined credit weaknesses so that timely action can be taken to minimize a potential credit loss, to identify relevant trends affecting the collectability of the loan portfolio, to isolate potential problem areas and to provide essential information for determining the adequacy of the allowance for loan losses.

This risk rating represents an assessed level of the loan’s risk based on the character and creditworthiness of the borrower/guarantor, the capacity of the borrower to adequately service the debt, any credit enhancements or additional sources of repayment, and the quality, value and coverage of the collateral, if any.

credit weaknesses so that timely action can be taken to minimize a potential credit loss, to identify relevant trends affecting the collectability of the loan portfolio, to isolate potential problem areas and to provide essential information for determining the adequacy of the allowance for loan losses.

The Company’s credit risk rating system has nine grades, with each grade corresponding to a progressively greater risk of default.

7 unchanged sentences

Risk ratings are assigned as necessary to differentiate risk within the portfolio.

They are reviewed on an ongoing basis through the annual loan review process performed by Company personnel, normal renewal activity and the quarterly Watch List and watched asset report process.

They are reviewed on an ongoing basis through the annual loan review process performed by Company employees, normal renewal activity and the quarterly Watch List and watched asset report process.

They are revised to reflect changes in the borrower's financial condition and outlook, debt service coverage capability, repayment performance, collateral value and coverage as well as other considerations.

29 unchanged sentences

When the loan is 30 days past due, the Company mails the borrower a letter reminding the borrower of the delinquency, and attempts to contact the borrower personally to determine the reason for the delinquency and ensure the borrower understands the terms of the loan.

If necessary,

after the 90th day of delinquency, the Company may take other appropriate legal action.

If necessary, after the 90th day of delinquency, the Company may take other appropriate legal action.

A summary report of all loans 30 days or more past due is provided to the Board of Directors of the Company periodically.

2 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 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 are met.

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 are met.

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

20 unchanged sentences

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

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.

There were no loans delinquent greater than 90 days and still accruing interest as of December 31, 2022.

There were two loans, totaling $ 1.1 million, loans 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

6 unchanged sentences

Total $ 16,441 $ 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 years ended December 31, 2021 and 2020 was $ 0.9 million and $ 0.8 million, respectively.

There was $ 62 thousand and no interest income recognized on these loans for the year ended December 31, 2021 and 2020, respectively.

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 years ended December 31, 2022 and 2021 w as $ 0.8 million and $ 0.9 million, respectively.

There w as no and $ 62 thousand interest income recognized on these loans for the year ended December 31, 2022 and 2021, respectively.

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

4 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 loan that is estimated to be impaired.

The following tables summarize impaired loans by portfolio segment and the average carrying amount and interest income recognized on impaired loans by portfolio segment as of December 31, 2021 and December 31, 2020:

The following tables summarize impaired loans by portfolio segment and the related average carrying amount and interest income recognized as of December 31, 2022 and December 31, 2021:

As of and for the Year Ended December 31, 2022

29 unchanged sentences

Impaired loans with a valuation allowance:

Residential real estate 2,299 2,304 261 2,337 65

Commercial real estate 21,328 21,367 2,520 22,139 552

21 unchanged sentences

Total 1 5 $ 703 $ 16,865 $ 703 $ 16,989

At December 31, 2021 and December 31, 2020, there were five nonaccrual loans identified as TDRs totaling $ 2.0 million and three nonaccrual loans identified as TDRs totaling $ 1.4 million, respectively.

At December 31, 2022 and December 31, 2021, there were seven nonaccrual loans identified as TDRs totaling $ 2.5 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 year ended December 31, 2022 or December 31, 2021.

5 unchanged sentences

Total $ 703 $ 16,989

Section 4013 of the CARES Act provides relief from certain requirements under GAAP and permits a financial institution to elect to suspend troubled debt restructuring accounting, in certain circumstances, beginning March 1, 2020 and ending on the earlier of January 1, 2022, or sixty days after the national emergency concerning COVID-19 terminates.

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.

Premises and Equipment

11 unchanged sentences

Premises and equipment, net $ 27,199 $ 25,588

For the years ended December 31, 2021 and December 31, 2020, depreciation and amortization expense related to premises and equipment totaled $ 3.6 million and $ 3.3 million, respectively.

For the years ended December 31, 2022 and December 31, 2021, depreciation and amortization expense related to premises and e quipment totaled $ 3.4 million and $ 3.6 million, respectively.

For the years ended December 31, 2022 and December 31, 2021, depreciation and amortization expense includes amortization of the right-of-use-asset, totaling $ 1.5 million and $ 1.6 million, respectively.

1 unchanged sentence

The branch leases have maturities ranging from 2023 to 2031, some of which include options to extend the lease term.

The Company is not reasonably certain to exercise these renewal options, and as a result, these optional periods are not included in determining the lease term.

The Company is not r easonably certain to exercise these renewal options, and as a result, these optional periods are not included in determining the lease term.

The weighted average remaining life of the lease term for these leases was 6.6 years as of December 31, 2022.

2 unchanged sentences

The Company utilized a weighted average discount rate of 5.4 % in determining the lease liability for its branch locations and a discount rate of 4.5 % for its headquarter building.

The total fixed operating lease costs were $ 3.0 million and $ 2.3 million for the years ended December 31, 2021 and December 31, 2020, respectively.

The total fixed operating lease costs wer e $ 2.5 million and $ 3.0 million for the years ended December 31, 2022 and December 31, 2021, respectively.

The total variable operating lease costs were $ 0.1 million for each of the years ended December 31, 2022 and December 31, 2021.

22 unchanged sentences

Deferred compensation

The Company has a non-qualified deferred compensation plan for the Board of Directors that allows for the deferral of fees earned related to services rendered for the Company.

The deferred compensation balance increased $ 1.5 million for the year ended December 31, 2021 compared to the year ended December 31, 2020.

The increase was primarily driven by an appreciation in fair market value and participant contributions.

The Company has a non-qualified deferred compensation plan for the Board of Directors that allows for the deferral of fees earned related to services rendered for the Co mpany.

The deferred compensation balance decreased $ 1.2 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.

The decrease was primarily driven by participant distributions.

Loan servicing

7 unchanged sentences

The carrying value of loan servicing rights was $ 0.7 million and $ 0.8 million as of December 31, 2022 and December 31, 2021, respectively.

The following table presents the changes in carrying value for loan servicing assets:

The following table presents the changes in carrying value for loan servicing assets net of allowances:

December 31, 2022 December 31, 2021

9 unchanged sentences

Assets held for sale

For the year ended December 31, 2022, the Bank did not have any assets held for sale.

For the year ended December 31, 2021, the assets held for sale balance of $ 2.3 million consists of a former Bank office building.

Upon the transfer to held for sale, the asset was written down to its fair market value, less costs to sell, and a charge of $ 1.7 million was recognized for the year ended December 31, 2020.

The asset was further impaired for the year ended December 31, 2021, and a charge of $ 0.3 million was recognized.

The impairment charge is included in occupancy and equipment expense on the consolidated statements of income.

19 unchanged sentences

Brokered certificate of deposits totaled $ 976.5 million and $ 249.4 million at December 31, 2022 and December 31, 2021, respectively.

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

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

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

Brokered money market accounts totaled $ 50.1 million and $ 104.0 million at December 31, 2022 and 2021, respectively.

15 unchanged sentences

Total advances $ 90,000 2.29 % $ 50,000 1.81 %

(1) The Company's FHLB borrowings are subject to longer term swap agreements and the weighted average rate reflects the all in swap rate under these long term swap agreements.

(1) $ 50 million of t he Company's FHLB borrowings are subject to longer term interest rate swap agreements and the weighted average rate reflects the " all-in" swap rate under these long term interest rate swap agreements.

$ 50 million of the above mentioned FHLB advances as of December 31, 2022 were subject to interest rate swap transactions and $ 50.0 million of the above mentioned FHLB advances as of December 31, 2021 were subject to interest rate swap transactions, see Note 18.

1 unchanged sentence

The Bank has additional borrowing capacity at the FHLB up to a certain percentage of the value of qualified collateral.

In accordance with agreements with the FHLB, the qualified collateral must be free and clear of liens, pledges and encumbrances.

In accordance with agreements with the FHLB, the qualified collateral must be free a nd clear of liens, pledges and encumbrances.

At December 31, 2022, the Company had pledged eligible loans with a book value of $ 941.9 million as collateral to support borrowing capacity at the FHLB of Boston.

As of December 31, 2021, the Company has immediate availability to borrow an additional $ 349.1 million based on qualified collateral.

At December 31, 2021, the Bank had a secured letter of credit with the FHLB and unsecured lines of credit with Atlantic Community Bankers Bank, Zions Bank and Texas Capital Bank.

The total letter or line of credit and the amount outstanding at December 31, 2021 is summarized below:

As of December 31, 2022, the Company has immediate availability to borrow an additional $ 402.2 million b ased on qualified collateral.

At December 31, 2022, the Bank had a secured borrowing line with the FRB, a letter of credit with the FHLB, and unsecured lines of credit with Atlantic Community Bankers Bank, Zions Bank and Texas Capital Bank.

The total borrowing line, letter, or line of credit and the amount outstanding at December 31, 2022 is summarized below:

December 31, 2022

1 unchanged sentence

(In thousands)

FRB $ 731,157 $ —

FHLB 402,152 96,000

5 unchanged sentences

As a member of the FHLB, the Bank is required to maintain investments in their capital stock.

The Bank owned 28,140 shares and 78,596 shares at December 31, 2021 and December 31, 2020, respectively.

There is no ready market or quoted market values for the stock and as such is classified as restricted stock.

The B ank owned 52,158 shares and 28,140 shares at December 31, 2022 and December 31, 2021, respectively.

There is no ready market or quote d market values for the stock and as such is classified as restricted stock.

The shares have a par value of $ 100 and are carried on the consolidated balance sheets at cost, and evaluated for impairment, as the stock is only redeemable at par subject to the redemption practices of the FHLB.

The determination of whether the par value will ultimately be recovered is influenced by criteria such as the following:

(a) the significance of the decline in net assets of the Federal Home Loan Bank as compared to the capital stock amount and the length of time this situation has persisted;

(b) commitments by the Federal Home Loan Bank to make payments required by law or regulation and the level of such payments in relation to the operating performance;

and (d) the liquidity position of the Federal Home Loan Bank.

(a) the significance of the decline in net assets of the FHLB as compared to the capital stock amount and the length of time this situation has persisted;

(b) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance;

and (d) the liquidity position of the FHLB.

Management evaluated the stock and concluded that the stock was not impaired as of December 31, 2022 or December 31, 2021.

5 unchanged sentences

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 Company used the net proceeds to repay the 2015 Notes and for general corporate purposes.

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

3 unchanged sentences

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.

On August 19, 2022, the Company entered into a Subordinated Note Purchase Agreement with certain qualified institutional buyers, pursuant to which the Company issued and sold 6.0 % fixed-to-floating rate subordinated notes due 2032 (the “2022 Notes”) in the aggregate principal amount of $ 35.0 million.

The Company intends to use the net proceeds from the sale of the 2022 Notes for general corporate purposes.

The 2022 Notes bear interest at a fixed rate of 6.0 % per year, from and including August 19, 2022 to, but excluding, September 1, 2027.

From and including September 1, 2027 to, but excluding the maturity date or early redemption date, the interest rate will reset quarterly at a variable rate equal to the then current three-month term SOFR plus 326 basis points.

The 2022 Notes have a stated maturity of September 1, 2032 and are non-callable for five years .

The Company may redeem the 2022 Notes, in whole or in part, at its option, on the fifth anniversary of the issue date or on any interest payment date thereafter.

Any redemption by the Company would be at a redemption price equal to 100 % of the principal amount of the 2022 Notes being redeemed, together with any accrued and unpaid interest on the 2022 Notes being redeemed to but excluding the

date of redemption.

The 2022 Notes are not subject to redemption at the option of the holder.

The 2022 Notes have 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.

2 unchanged sentences

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

For the years ended December 31, 2021 and 2020 the amortization expense for debt issuance costs were $ 0.3 million and $ 0.1 million, respectively, and were recognized as an increase to interest expense on borrowings within the consolidated statements of income.

For the years ended December 31, 2022 and 2021 the amortization expense for debt issuance co sts were $ 0.2 million and $ 0.3 million, respe ctively, and were recognized as an increase to interest expense on borrowings within the consolidated statements of income.

The Company recognized $ 1.9 million and $ 1.2 million in interest expense related to its subordinated debt for the years ended December 31, 2022 and 2021, respectively.

Commitments and Contingencies

As of December 31, 2021, the Company leases real estate for eight branch offices under various operating lease agreements.

As of December 31, 2022, the Company lease s real estate for eight br anch offices under various operating lease agreements.

The branch leases have maturities ranging from 2023 to 2031, some of which include options to extend the lease term.

4 unchanged sentences

Off-balance Sheet Instruments

In the normal course of business, the Company is a party to financial instruments with off-balance sheet risk to meet the financing needs of its customers.

In the normal course of business, the Company is a party to financial instruments with off-balance sheet risk to meet the financing needs of its clients.

These financial instruments include commitments to extend credit and involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the financial statements.

The contractual amounts of these instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The contractual amounts of commitments to extend credit represent the amounts of potential accounting loss should the contract be fully drawn upon, the customers default, and the value of any existing collateral becomes worthless.

Management uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments and evaluates each customer’s creditworthiness on a case-by-case basis.

The contractual amounts of commitments to extend credit represent the amounts of potential accounting loss should the contract be fully drawn upon, the clients default, and the value of any existing collateral becomes worthless.

Management uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments and evaluates each client’s creditworthiness on a case-by-case basis.

Management believes that they control the credit risk of these financial instruments through credit approvals, credit limits, monitoring procedures and the receipt of collateral as deemed necessary.

6 unchanged sentences

$ 560,964 $ 396,869

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract or certain milestones in the case of construction loans or otherwise required collateral under borrowing base limits are met.

Commitments to extend credit are agreements to lend to a client as long as there is no violation of any condition established in the contract or certain milestones in the case of construction loans or otherwise required collateral under borrowing base limits are met.

Commitments to extend credit generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower.

5 unchanged sentences

The reserve for unfunded commitments totaled $ 80 thousand at December 31, 2022 and $ 170 thousand at December 31, 2021.

As of December 31, 2021, the Bank had a remaining capital commitment of $ 3.6 million to two Small Business Investment Companies ("SBIC").

As of December 31, 2022, the Bank had a remaining capital co mmitment of $ 4.8 million to three Small Business Investment Companies ("SBIC").

One of these lending funds represents a related party business entity associated with one of the Company's Directors.

Contributions to these funds represent an equity investment for the Company.

In addition, as of December 31, 2021, the Bank had a commitment of $ 0.1 million, payable evenly over two years, to a non-profit business.

The components of income tax expense for the years ended December 31, 2022 and December 31, 2021 consisted of:

4 unchanged sentences

Total current 12,518 5,576

Deferred provision (credit):

Deferred (credit) provision:

Federal ( 1,644 ) 1,655

26 unchanged sentences

Unrealized loss on derivatives — 2,935

Unrealized loss on available for sale securities 1,941 —

Lease liabilities 3,138 3,402

4 unchanged sentences

Servicing rights 49 180

Core deposit intangible — 17

Depreciation 1,400 991

Unrealized gain on derivatives 1,896 —

Unrealized gain on available for sale securities — 475

Right-of-use-assets 2,940 3,228

Other 257 270

Gross deferred tax liabilities 7,930 6,197

2 unchanged sentences

Management evaluated its remaining deferred tax assets and believes no valuation allowances were needed at December 31, 2022 or December 31, 2021.

At December 31, 2021, the Company had federal net operating loss carryovers of $ 1.9 million.

At December 31, 2022, the Company had federal net operating loss carryove rs of $ 1.8 million.

The carryovers were transferred to the Company upon the merger with The Wilton Bank.

9 unchanged sentences

Balance, beginning of year $ 265 $ 394

Net (reductions) additions relating to potential liability with taxing authorities ( 129 ) 125

Net additions (reductions) relating to potential liability with taxing authorities 235 ( 129 )

Balance, end of year $ 500 $ 265

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

The Company has stock options or unvested restricted stock outstanding under three equity award plans, which are collectively referred to as the “Stock Plans.” Any future issuances of equity awards will be made under the 2022 Bankwell Financial Group, Inc.

Stock Plan, or the “2022 Plan,” as amended from time-to-time.

All equity awards made under the 2012 Plan are made by means of an award agreement, which contains the specific terms and conditions of the grant.

All equity awards made under the 2022 Plan and prior equity award plans are made by means of an award agreement, which contains the specific terms and conditions of the grant.

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

12 unchanged sentences

The total intrinsic value of stock options exercised during the years ended December 31, 2022 and December 31, 2021 was $ 52.0 thousand and $ 19.0 thousand, respectively.

The range of exercise prices for the 11,680 options exercisable at December 31, 2021 was $ 15.00 to $ 17.86 per share.

The exercise price for the 8,680 options exercisable at December 31, 2022 was $ 17.86 per share.

The weighted average remaining contractual life for these options was 0.4 years at December 31, 2022.

14 unchanged sentences

(2) Includes 29,105 shares of performance based restricted stock.

(3) Includes 4,480 shares of performance based restricted stock.

(3) Includ es 20,198 s hares of performance based restricted stock.

The total fair value of restricted stock awards vested during the year ended December 31, 2022 was $ 2.2 million .

The Company’s restricted stock expense for the years ended December 31, 2022 and December 31, 2021 was $ 2.4 million and $ 1.8 million, respectively.

At December 31, 2021, there was $ 3.2 million of unrecognized stock compensation expense for restricted stock, expected to be recognized over a weighted average period of 2.8 years.

At December 31, 2022, there w as $ 4.1 million of unrecognized stock compensation expense for restricted stock, expected to be recognized over a weighted average period of 2.7 years.

Performance based restricted stock :

The Company has 29,462 shares of performance based restricted stock outstanding as of December 31, 2021 pursuant to the Company’s 2012 Stock Plan.

The Company has 34,369 shares of performance based restricted stock outstanding as of December 31, 2022 pursuant to the Company’s Stock Plans.

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

5 unchanged sentences

Changes in fair value of the Company's derivatives are primarily driven by changes in interest rates and recognized in other comprehensive income.

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 years ended December 31, 2021 and December 31, 2020 is reported in the Consolidated Statements of Comprehensive Income.

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 years ended December 31, 2022 and December 31, 2021 is reported in the Consolidated Statements of Comprehensive Income.

The following tables present the changes in accumulated other comprehensive (loss) income by component, net of tax for the years ended December 31, 2022 and December 31, 2021:

27 unchanged sentences

(In thousands)

Unrealized losses on derivatives $ ( 3,719 ) $ ( 2,094 ) Interest expense on borrowings

Unrealized gains (losses) on derivatives $ ( 215 ) $ ( 3,719 ) Interest expense on borrowings

Tax benefit 49 824 Income tax expense

3 unchanged sentences

The Company does not use derivatives for speculative purposes.

As of December 31, 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.

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 December 31, 2021, the Company is party to four interest rate swaps not designated as hedging instruments, to minimize interest rate risk exposure with loans to customers.

As of December 31, 2022, the Company was a par ty to five int erest 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 FHLB advances or brokered deposits.

The Company terminated two swaps with a total notional amount of $ 50 million during the year ended December 31, 2022.

The underlying debt associated with the terminated swaps was kept in place.

The fair value of the terminated swaps totaled $ 154.7 thousand as of December 31, 2022.

The fair value of the terminated swaps will be reclassified from other comprehensive income to interest expense on a straight line basis over the original term of the hedging relationship.

As of December 31, 2022, the Company has four interest rate swaps not designated as hedging instruments, to minimize interest rate risk exposure with loans to clients.

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

1 unchanged sentence

A hedging instrument is expected at inception to be highly effective at offsetting changes in the hedged transactions attributable to the changes in the hedged risk.

Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain loan customers.

The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies.

Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain loan clients.

The Company executes interest rate swaps with commercial banking clients to facilitate their respective risk management strategies.

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.

9 unchanged sentences

$ 38,500 Other assets $ 4,207 $ 38,500 Accrued expenses and other liabilities $ ( 4,207 )

(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 December 31, 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 $ 13.7 million as of December 31, 2021.

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

Accrued interest receivable related to interest rate swaps as of December 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 asset position, including accrued interest, totaled $ 8.8 million as of December 31, 2022.

As of December 31, 2021

7 unchanged sentences

$ 38,500 Other assets $ 2,585 $ 38,500 Accrued expenses and other liabilities $ ( 2,585 )

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

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

Accrued interest payable related to interest rate swaps as of December 31, 2021 totaled $ 0.6 million and is excluded from the fair value presented in the table above.

2 unchanged sentences

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.

The Company expects to reclassify $ 2.9 million to interest expense during the next 12 months.

The Company expects to rec lassify $ 4.1 million t o interest income during the next 12 months.

The Company assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged item or transaction.

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Derivative Assets $ 13,097 $ — $ 13,097 $ — $ 12,771 $ 326

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

(1) Includes accrued interest receivabl e totaling $ 599 thousand.

December 31, 2022

3 unchanged sentences

Derivative Liabilities $ 4,258 $ — $ 4,258 $ — $ — $ 4,258

(1) Includes accrued interest payable totaling $ 558 thousand.

(1) Includes no accrued interest.

December 31, 2021

3 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

81 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 3.3 % to 4.6 % as of December 31, 2021 and 2.9 % to 3.3 % as of December 31, 2020.

The fair value for these securities is estimated using a discounted cash flow model, using discount rates ranging from 4.9 % to 7.3 % a s of December 31, 2022 and 3.3 % to 4.6 % as of December 31, 2021.

These securities are CRA eligible investments.

7 unchanged sentences

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

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.

80 unchanged sentences

Prepayment rate 3.00 - 17.00 %

Assets held for sale $ 2,268 Sale & Income Approach Adjustment to valuation and cost to sell N/A

December 31, 2021

4 unchanged sentences

Assets held for sale $ 2,268 Sale & Income Approach Adjustment to valuation and cost to sell N/A

(1) Servicing liabilities totaling $ 14 thousand were valued using a discount rate of 0.8 %.

(1) Servicing liabilities tota ling $ 23 thousand were valued u sing a discount rate of 4.0 %.

(2) Servicing liabilities totaling $ 14 thousand were valued using a discount rate of 0.8 %.

18 unchanged sentences

banking organizations.

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 Tier 1 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.

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 Tier 1 equity in an amount above the minimum risk-based capital requirements for “adeq uately 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 t o 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.

41 unchanged sentences

In the normal course of business, the Company may grant loans to executive officers, directors and members of their immediate families, as defined, and to entities in which these individuals have more than a 10 % equity ownership.

Such loans are transacted at terms including interest rates, similar to those available to unrelated customers.

Such loans are transacted at terms including interest rates, similar to those available to unrelated clients.

Changes in loans outstanding to such related parties during the years ending December 31, 2022 and December 31, 2021 were as follows:

5 unchanged sentences

Related party deposits aggregated approximately $ 18.7 million and $ 53.8 million at December 31, 2022 and December 31, 2021, respectively.

During the years ended December 31, 2021 and December 31, 2020, the Company paid approximately $ 13 thousand and $ 16 thousand, respectively, to related parties for services provided to the Company.

During the years ended December 31, 2022 and December 31, 2021, the Company paid appro ximately $ 5 thousand and $ 13 thousand, respectively, to related parties for services provided to the Company.

The payments were primarily for consulting and legal services.

As of December 31, 2021, the Bank had a $ 0.8 million investment in a SBIC that represents a related party business entity associated with one of the Company's Directors.

As of December 31, 2022, the Bank had a $ 1.6 million invest ment in a SBIC that represents a related party business entity associated with one of the Company's Directors.

Contributions to this fund represent an equity investment for the Company.

9 unchanged sentences

Investment in subsidiary 297,723 226,700

Premises and equipment, net — 3

Deferred income taxes, net 507 332

21 unchanged sentences

Net income $ 37,429 $ 26,586

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

Adjustments to reconcile net income to net cash used in operating activities:

Equity in undistributed earnings ( 42,650 ) ( 31,035 )

(Increase) decrease in other assets ( 1,142 ) 327

Decrease (increase) decrease in other assets 884 ( 1,142 )

Increase in deferred income taxes, net ( 175 ) ( 127 )

Increase (decrease) in other liabilities 1,487 ( 654 )

(Decrease) increase in other liabilities ( 770 ) 1,487

Stock-based compensation 2,362 1,834

Amortization of debt issuance costs 164 265

Net cash (used in) provided by operating activities ( 2,132 ) 21,768

Net cash used in operating activities ( 2,756 ) ( 2,132 )

Cash flows from investing activities

4 unchanged sentences

Retirement of subordinated debt — ( 25,500 )

Proceeds from exercise of options & warrants 53 16

Proceeds from exercise of options 48 53

Dividends paid on common stock ( 6,189 ) ( 5,025 )

1 unchanged sentence

Capital contribution to Bank ( 20,000 ) ( 10,000 )

Net cash used in financing activities ( 11,131 ) ( 5,410 )

Net (decrease) increase in cash and cash equivalents ( 13,260 ) 16,362

Net cash provided by (used in) financing activities 2,671 ( 11,131 )

Net decrease in cash and cash equivalents ( 85 ) ( 13,260 )

Cash and cash equivalents:

5 unchanged sentences

Subsequent Events

The Company's Board of Directors declared a $ 0.20 per share cash dividend, payable February 24, 2022 to shareholders of record on February 14, 2022, representing an 11 % increase when compared to the prior quarter’s dividend.

Subsequent to the year ended December 31, 2021, as of March 7, 2022, the Company purchased 109,564 shares of its Common Stock at a weighted average price of $ 34.01 per share.

The Company's Board of Directors declared a $ 0.20 per share cash dividend, payable February 23, 2023 to shareholders of record on February 13, 2023.

Effective March 1, 2023, the Bank received final regulatory approval to proceed with the opening of a retail branch located at 300 Atlantic Street, Stamford, CT.

This branch will replace the 612 Bedford Street, Stamford, CT location, which is scheduled to close in April 2023.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data