What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-09 compared with 2023-05-10 · 269 added, 169 removed, 1062 unchanged (29% of the section changed)

3 unchanged sentences

(In thousands, except share data)

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Cash and due from banks $ 207,345 $ 344,925

4 unchanged sentences

Available for sale investment securities, at fair value 99,938 103,663

Held to maturity investment securities, at amortized cost (fair values of $ 15,881 and $ 15,435 at March 31, 2023 and December 31, 2022, respectively)

Held to maturity investment securities, at amortized cost (fair values of $ 15,499 and $ 15,435 at June 30, 2023 and December 31, 2022, respectively)

15,884 15,983

Total investment securities 117,839 121,634

Loans receivable (net of ACL-Loans of $ 27,998 at March 31, 2023 and $ 22,431 at December 31, 2022)

Loans receivable (net of ACL-Loans of $ 30,694 at June 30, 2023 and $ 22,431 at December 31, 2022)

2,736,607 2,646,384

12 unchanged sentences

Advances from the Federal Home Loan Bank 90,000 90,000

Subordinated debentures (face value of $ 70,000 and $ 70,000 at March 31, 2023 and December 31, 2022, respectively, less unamortized debt issuance costs of $ 980 and $ 1,041 at March 31, 2023 and December 31, 2022, respectively)

Subordinated debentures (face value of $ 70,000 and $ 70,000 at June 30, 2023 and December 31, 2022, respectively, less unamortized debt issuance costs of $ 918 and $ 1,041 at June 30, 2023 and December 31, 2022, respectively)

69,082 68,959

4 unchanged sentences

Common stock, no par value;

10,000,000 shares authorized, 7,843,438 and 7,730,699 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

10,000,000 shares authorized, 7,829,950 and 7,730,699 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

116,541 115,018

7 unchanged sentences

(In thousands, except share data)

Three Months Ended March 31,

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

2023 2022 2023 2022

Interest and dividend income

8 unchanged sentences

Net interest income 23,991 23,823 49,532 43,333

Provision for credit losses 826 229

Provision (credit) for credit losses 2,579 ( 1,445 ) 3,405 ( 1,216 )

Net interest income after provision for credit losses 21,412 25,268 46,127 44,549

29 unchanged sentences

(In thousands)

Three Months Ended March 31,

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

2023 2022 2023 2022

Net income $ 7,983 $ 12,022 $ 18,362 $ 20,234

1 unchanged sentence

Unrealized gains (losses) on securities:

Unrealized holding gains (losses) on available for sale securities 752 ( 4,767 )

Unrealized holding (losses) gains on available for sale securities ( 1,941 ) ( 1,924 ) ( 1,189 ) ( 6,691 )

Reclassification adjustment for gain realized in net income — — — —

Net change in unrealized gains (losses) 752 ( 4,767 )

Income tax (expense) benefit ( 118 ) 1,064

Unrealized gains (losses) on securities, net of tax 634 ( 3,703 )

Unrealized (losses) gains on interest rate swaps:

Unrealized (losses) gains on interest rate swaps ( 1,981 ) 11,016

Net change in unrealized (losses) gains ( 1,941 ) ( 1,924 ) ( 1,189 ) ( 6,691 )

Income tax benefit (expense) 446 430 328 1,494

Unrealized (losses) gains on interest rate swaps, net of tax ( 1,579 ) 8,555

Unrealized (losses) gains on securities, net of tax ( 1,495 ) ( 1,494 ) ( 861 ) ( 5,197 )

Unrealized (losses) gains on interest rate swaps:

Unrealized gains (losses) on interest rate swaps 1,185 7,144 ( 796 ) 18,160

Income tax (expense) benefit ( 272 ) ( 1,596 ) 130 ( 4,057 )

Unrealized gains (losses) on interest rate swaps, net of tax 913 5,548 ( 666 ) 14,103

Total other comprehensive (loss) income, net of tax ( 582 ) 4,054 ( 1,527 ) 8,906

2 unchanged sentences

Bankwell Financial Group, Inc.

Consolidated Statements of Shareholders' Equity

Consolidated Statements of Shareholders' Equity - (unaudited)

(In thousands, except share data)

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

Balance at March 31, 2023 7,843,438 $ 115,875 $ 127,566 $ ( 1,134 ) $ 242,307

Net income — — 7,983 — 7,983

Other comprehensive income, net of tax — — — ( 582 ) ( 582 )

Cash dividends declared ($ 0.20 per share)

— — ( 1,561 ) — ( 1,561 )

Stock-based compensation expense — 666 — — 666

Forfeitures of restricted stock ( 13,488 ) — — — —

Issuance of restricted stock — — — — —

Stock options exercised — — — — —

Repurchase of common stock — — — — —

Balance at June 30, 2023 7,829,950 $ 116,541 $ 133,988 $ ( 1,716 ) $ 248,813

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

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

Net income — — 12,022 — 12,022

Other comprehensive income, net of tax — — — 4,054 4,054

Cash dividends declared ($ 0.20 per share)

— — ( 1,546 ) — ( 1,546 )

Stock-based compensation expense — 717 — — 717

Forfeitures of restricted stock ( 9,449 ) — — — —

Warrants exercised — — — — —

Issuance of restricted stock 500 — — — —

Stock options exercised — — — — —

Repurchase of common stock — — — — —

Balance at June 30, 2022 7,752,389 $ 115,599 $ 109,523 $ 345 $ 225,467

See accompanying notes to consolidated financial statements (unaudited)

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

Balance at December 31, 2022 7,730,699 $ 115,018 $ 123,640 $ ( 189 ) $ 238,469

11 unchanged sentences

Repurchase of common stock — — — — —

Balance at March 31, 2023 7,843,438 $ 115,875 $ 127,566 $ ( 1,134 ) $ 242,307

Balance at June 30, 2023 7,829,950 $ 116,541 $ 133,988 $ ( 1,716 ) $ 248,813

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

9 unchanged sentences

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

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

Balance at June 30, 2022 7,752,389 $ 115,599 $ 109,523 $ 345 $ 225,467

See accompanying notes to consolidated financial statements (unaudited)

2 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities

3 unchanged sentences

Provision for credit losses 3,405 ( 1,216 )

Provision (credit) for deferred income taxes 472 ( 303 )

(Credit) provision for deferred income taxes ( 676 ) 642

Change in fair value of marketable equity securities ( 6 ) 55

4 unchanged sentences

Stock-based compensation 1,368 1,258

Loss (gain) on sale of premises and equipment 13 ( 51 )

Net change in:

16 unchanged sentences

Bankwell Financial Group, Inc.

Consolidated Statements of Cash Flows - (Continued)

Consolidated Statements of Cash Flows - (unaudited) (Continued)

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from financing activities

1 unchanged sentence

Net change in other deposits ( 112,962 ) ( 109,325 )

Net change in FHLB advances — 55,000

Proceeds from exercise of options 155 30

1 unchanged sentence

Repurchase of common stock — ( 3,837 )

Net cash (used in) provided by financing activities ( 3,916 ) 36,834

Net cash used in financing activities ( 14,921 ) ( 42,391 )

Net decrease in cash and cash equivalents ( 93,628 ) ( 173,655 )

34 unchanged sentences

Significant concentrations of credit risk

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

Many of the Company's activities are with clients located in Connecticut and New York, with the majority of the Company's commercial real estate investor loans in Connecticut and some New York metro area counties.

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

35 unchanged sentences

2017-04 as of March 31, 2023 and it had no impact to the Company's financial statements.

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

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.

For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities are required to use a new forward looking “expected loss” model that will replace today’s “incurred loss” model and can result in the earlier recognition of credit losses.

For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward looking “expected loss” model that will replace today’s “incurred loss” model and can result in the earlier recognition of credit losses.

For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except that the losses will be recognized as an allowance.

11 unchanged sentences

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.

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.

Government and have minimal risk of loss.

The Corporate Securities have 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.

18 unchanged sentences

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

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

"Troubled Debt Restructurings and Vintage Disclosures".

ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings (“TDRs”) in ASC 310-40, “Receivables - Troubled Debt Restructurings by Creditors” for entities that have adopted the current expected credit loss (“CECL”) model introduced by ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments” (ASU 2016-13”).

ASU 2022-02 also requires that public business entities disclose current-period gross charge-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, “Financial Instruments—Credit Losses—Measured at Amortized Cost”.

ASU 2022-02 is effective for the Company for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted.

The Company adopted ASU 2022-02 on January 1, 2023 and it did not have a material effect on the Company’s consolidated 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 March 31, 2023 were as follows:

March 31, 2023

The amortized cost, gross unrealized gains and losses and fair value of available for sale and held to maturity securities at June 30, 2023 were as follows:

June 30, 2023

Amortized Cost Gross Unrealized Fair Value

38 unchanged sentences

Total held to maturity securities $ 15,983 $ 316 $ ( 864 ) $ 15,435

There were no sales of investment securities during the three months ended March 31, 2023 or 2022.

At March 31, 2023 and December 31, 2022, 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, 2023 and December 31, 2022, the actual durations of the Company's available for sale securities were significantly shorter than the stated maturities.

As of March 31, 2023, the Company held marketable equity securities with a fair value of $ 2.0 million and an amortized cost of $ 2.1 million.

There were no sales of investment securities during the six months ended June 30, 2023 or 2022.

At June 30, 2023 and December 31, 2022, none of the Company's securities were pledged as collateral with the Federal Home Loan Bank ("FHLB") or any other institution.

As of June 30, 2023 and December 31, 2022, the actual durations of the Company's available for sale securities were significantly shorter than the stated maturities.

As of June 30, 2023, the Company held marketable equity securities with a fair value of $ 2.0 million and an amortized cost of $ 2.2 million.

At December 31, 2022, the Company held marketable equity securities with a fair value of $ 2.0 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.

The following tables provide information regarding available for sale securities and held to maturity securities with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2023 and December 31, 2022:

These securities represent an investment in mutual funds that have an objective to make investments for Community Reinvestment Act ("CRA") purposes.

Length of Time in Continuous Unrealized Loss Position

5 unchanged sentences

(Dollars in thousands)

March 31, 2023

June 30, 2023

Government and agency obligations $ 14,325 $ ( 294 ) 0.32 % $ 71,493 $ ( 6,705 ) 7.22 % $ 85,818 $ ( 6,999 ) 7.54 %

14 unchanged sentences

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

There were thirty-six available for sale securities or held to maturity securities as of March 31, 2023 and December 31, 2022, respectively, in which the fair value of the security was less than the amortized cost of the security.

There were thirty-five and thirty-six available for sale securities or held to maturity securities as of June 30, 2023 and December 31, 2022, 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 corporate bonds are investments in subordinated debt of federally insured banks, the majority of which are callable after five years of origination.

The Company continually monitors its corporate bond, state agency and municipal bond portfolios and at this time these portfolios have minimal default risk because corporate bond, 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, 2023 until the decline in value has recovered or the security has matured.

The corporate bonds are investments in subordinated debt of federally insured banks, the majority of which are callable after five years o f origination.

The Company monitors its corporate bond, state agency and municipal bond portfolios and have minimal default risk.

The Company has the intent and ability to retain its investment securities in an unrealized loss position at June 30, 2023 until the decline in value has recovered or the security has matured.

Loans Receivable and ACL-Loans

The following table sets forth a summary of the loan portfolio at March 31, 2023 and December 31, 2022:

(In thousands) March 31, 2023 December 31, 2022

The following table sets forth a summary of the loan portfolio at June 30, 2023 and December 31, 2022:

(In thousands) June 30, 2023 December 31, 2022

Real estate loans:

10 unchanged sentences

Loans receivable, net $ 2,736,607 $ 2,646,384

(1) The March 31, 2023 and December 31, 2022 balances include $ 30 thousand and $ 33 thousand, respectively, of Paycheck Protection Program ("PPP") loans made under the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act").

(1) The June 30, 2023 and December 31, 2022 balances in clude $ 26 thousand and $ 33 thousand, respectively, of Paycheck Protection Program ("PPP") loans made under the Coronavirus Aid, Relief and Economic Security Act (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 client and extends credit of up to 85 % of the market value of the collateral, depending on the client'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, ( 85 % maximum for owner occupied commercial real estate), depending on the client's creditworthiness and the type of collateral.

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

2 unchanged sentences

While collateral provides assurance as a secondary source of repayment, the Company ordinarily requires the primary source of repayment for commercial loans to be based on the client’s ability to generate continuing cash flows.

In the fourth quarter of 2017, management made the strategic decision to cease the origination of residential mortgage loans.

At the beginning of the third quarter 2019, the Company no longer offered 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.

In certain situations, the amount may have exceeded 80 % LTV either with private mortgage insurance being required for that portion of the residential loan in excess of 80 % of the appraised value of the property or where secondary financing is provided by a housing authority program second mortgage, a community’s low/moderate income housing program, or a religious or civic organization.

The Company does not provide first or second consumer mortgage loans secured by residential properties but has a small legacy portfolio which continues to amortize, pay off due to the sale of the collateral, or refinance away from the Company.

Credit quality of loans and the Allowance for credit losses - Loans (ACL-Loans)

20 unchanged sentences

This portfolio segment includes commercial business loans secured by assignments of corporate assets and personal guarantees of the business owners.

Commercial business loans generally have higher interest rates and shorter terms than other loans, but they also have increased difficulty of loan monitoring and a higher risk of default since their repayment generally depends on the successful operation of the client’s business.

Commercial business loans generally have higher interest rates and shorter terms than other loans, and their repayment generally depends on the successful operation of the client’s business.

This portfolio segment includes loans secured by savings or certificate accounts, automobiles, as well as unsecured personal loans and overdraft lines of credit.

In addition, there are loans to finance insurance premiums, secured primarily by the cash surrender value of life insurance and marketable securities.

The following tables set forth the activity in the Company’s ACL-Loans for the three months ended March 31, 2023 and 2022, by portfolio segment:

The following tables set forth the activity in the Company’s ACL-Loans for the three and six months ended June 30, 2023 and 2022, by portfolio segment:

Residential Real Estate Commercial Real Estate Construction Commercial Business Consumer Total

(In thousands)

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Beginning balance $ 207 $ 19,413 $ 1,070 $ 6,593 $ 715 $ 27,998

Charge-offs — — — — ( 25 ) ( 25 )

Recoveries — — — 32 11 43

(Credit) provision for credit losses ( 17 ) 535 728 163 1,269 2,678

Ending balance $ 190 $ 19,948 $ 1,798 $ 6,788 $ 1,970 $ 30,694

Residential Real Estate Commercial Real Estate Construction Commercial Business Consumer Total

(In thousands)

Three Months Ended June 30, 2022

Beginning balance $ 358 $ 13,441 $ 56 $ 3,254 $ 32 $ 17,141

Charge-offs — — — — — —

Recoveries — 77 — — — 77

(Credit) provision for credit losses ( 27 ) ( 2,038 ) 39 548 33 ( 1,445 )

Ending balance $ 331 $ 11,480 $ 95 $ 3,802 $ 65 $ 15,773

Residential Real Estate Commercial Real Estate Construction Commercial Business Consumer Total

(In thousands)

Six Months Ended June 30, 2023

Balance As of December 31,2022 $ 163 $ 15,597 $ 311 $ 6,214 $ 146 $ 22,431

7 unchanged sentences

(In thousands)

Three Months Ended March 31, 2022

Six Months Ended June 30, 2022

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

5 unchanged sentences

Generally, loans up for renewal are subject to a full credit evaluation before the renewal is granted and such loans are considered current period originations for purpose of the tables below.

The following tables present loans by origination and risk designation as of March 31, 2023 and December 31, 2022 (dollars in thousands):

Amortized Cost Balances by Origination Year

The following tables present loans by origination and risk designation as of June 30, 2023 and December 31, 2022 (dollars in thousands):

Amortized Cost Balances by Origination Year as of June 30, 2023

2023 2022 2021 2020 2019 Prior Total

46 unchanged sentences

Current period net charge-offs $ 21 $ — $ — $ — $ 407 $ — $ 428

Amortized Cost Balances by Origination Year

Amortized Cost Balances by Origination Year as of December 31, 2022

2022 2021 2020 2019 2018 Prior Total

46 unchanged sentences

Current period net charge-offs $ ( 82 ) $ — $ — $ — $ — $ ( 10 ) $ ( 92 )

Loans evaluated for impairment and the related ACL-Loans as of March 31, 2023 and December 31, 2022 were as follows:

Loans evaluated for impairment and the related ACL-Loans as of June 30, 2023 and December 31, 2022 were as follows:

Portfolio ACL-Loans

(In thousands)

March 31, 2023

June 30, 2023

Loans individually evaluated for impairment:

46 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 March 31, 2023 and December 31, 2022:

The following tables present credit risk ratings by loan segment as of June 30, 2023 and December 31, 2022:

Commercial Credit Quality Indicators

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

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

7 unchanged sentences

Residential and Consumer Credit Quality Indicators

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Residential Real Estate Consumer Total Residential Real Estate Consumer Total

15 unchanged sentences

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

The following tables set forth certain information with respect to the Company's loan portfolio delinquencies by portfolio segment as of March 31, 2023 and December 31, 2022:

March 31, 2023

The following tables set forth certain information with respect to the Company's loan portfolio delinquencies by portfolio segment as of June 30, 2023 and December 31, 2022:

June 30, 2023

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 $ 2,058 $ — $ 14,003 $ 16,061 $ 2,659,387 $ 2,675,448

There w ere no lo ans delinquent greater than 90 days and still accruing interest as of March 31, 2023 or December 31, 2022.

There w ere no lo ans delinquent greater than 90 days and still accruing interest as of June 30, 2023 or December 31, 2022.

Loans on nonaccrual status

The following is a summary of nonaccrual loans by portfolio segment as of March 31, 2023 and December 31, 2022:

March 31, 2023 December 31, 2022

The following is a summary of nonaccrual loans by portfolio segment as of June 30, 2023 and December 31, 2022:

June 30, 2023 December 31, 2022

(In thousands)

4 unchanged sentences

Total $ 15,531 $ 16,441

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, 2023 and 2022 was $ 3.2 million and $ 0.2 million, respectively.

At March 31, 2023 and December 31, 2022, there were no commitments to lend additional funds to any borrower on nonaccrual status.

Nonaccrual loans with no specific reserve totaled $ 14.3 million and $ 14.7 million at March 31, 2023 and December 31, 2022, 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 six months ended June 30, 2023 and 2022 was $ 4.2 million and $ 0.4 million, respectively.

There was no i nterest income recognized on these loans for the six months ended June 30, 2023 and 2022.

At June 30, 2023 and December 31, 2022, there were no commitments to lend additional funds to any borrower on nonaccrual status.

Nonaccrual loans with no specific reserve totaled $ 26.6 million and $ 14.7 million at June 30, 2023 and December 31, 2022, respectively, as these loans were deemed to be adequately collateralized.

Individually evaluated 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 individually evaluated loans by portfolio segment as of March 31, 2023 and December 31, 2022:

The following table summarizes individually evaluated loans by portfolio segment as of June 30, 2023 and December 31, 2022:

Carrying Amount Unpaid Principal Balance Associated ACL-Loans

March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022 June 30, 2023 December 31, 2022 June 30, 2023 December 31, 2022

(In thousands)

11 unchanged sentences

Total individually evaluated loans $ 35,787 $ 42,830 $ 36,578 $ 43,656 $ 681 $ 901

The following table summarizes the average carrying amount of individually evaluated loans and interest income recognized on individually evaluated loans by portfolio segment for the three months ended March 31, 2023 and 2022:

Average Carrying Amount Interest Income Recognized

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

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

2023 2022 2023 2022

12 unchanged sentences

Total individually evaluated loans $ 35,874 $ 41,902 $ 147 $ 169

Average Carrying Amount Interest Income Recognized

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

2023 2022 2023 2022

(In thousands)

Individually evaluated loans without a valuation allowance:

Residential real estate $ 3,814 $ 2,182 $ 40 $ —

Commercial real estate 1,912 1,213 — —

Commercial business 5,035 1,020 84 10

Construction 9,382 9,217 — —

Total individually evaluated loans without a valuation allowance 20,143 13,632 124 10

Individually evaluated loans with a valuation allowance:

Residential real estate $ — $ 1,737 $ — $ 24

Commercial real estate 15,891 24,450 173 278

Construction — 2,139 — 27

Total individually evaluated loans with a valuation allowance 15,891 28,326 173 329

Total individually evaluated loans $ 36,034 $ 41,958 $ 297 $ 339

Loan Modifications

A loan will be considered modified when both of the following conditions are met:

A loan will be considered modified as defined by ASU 2022-02 when both of the following conditions are met:

1) the borrower is experiencing financial difficulties and 2) the modification constitutes a direct change in contractual cash flows.

Modified terms are dependent upon the financial position and needs of the individual borrower.

Loan modifications were $ 22.0 million and $ 22.2 million for March 31, 2023 and December 31, 2022, respectively.

There were no new loan modifications reportable under ASU 2022-02 at June 30, 2023.

Information on loan modifications prior to the adoption of ASU 2022-02 is presented in accordance with the applicable accounting standards in effect at that time.

As of December 31, 2022, loan modifications to taled $ 22.2 million.

The following table provides information on loans that were modified during the periods indicated.

1 unchanged sentence

(Dollars in thousands) 2023 2022 2023 2022 2023 2022

Three Months Ended March 31,

Three Months Ended June 30,

Residential real estate — 1 $ — $ 703 $ — $ 703

2 unchanged sentences

Total — 1 $ — $ 703 $ — $ 703

The following table provides information on how loans were modified during the three months ended March 31, 2023 and March 31, 2022.

Three Months Ended March 31,

Number of Loans Pre-Modification Post-Modification

(Dollars in thousands) 2023 2022 2023 2022 2023 2022

Six Months Ended June 30,

Residential real estate — 1 $ — $ 703 $ — $ 703

Commercial business — — — — — —

Commercial real estate — — — — — —

Total — 1 $ — $ 703 $ — $ 703

The following table provides information on how loans were modified during the three and six months ended June 30, 2023 and June 30, 2022.

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

2023 2022 2023 2022

(In thousands)

6 unchanged sentences

The provision is recorded within the Provision for credit losses on the Company’s Consolidated Statements of Income.

The following table presents a rollforward of the ACL-Unfunded Commitments for the three months ended March 31, 2023 and March 31, 2022:

Three Months Ended March 31,

The following table presents a roll forward of the ACL-Unfunded Commitments for the three and six months ended June 30, 2023 and June 30, 2022:

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

2023 2022 2023 2022

(In thousands)

5 unchanged sentences

Balance at end of period $ 1,066 $ 60 $ 1,066 $ 60

(1) In 2022, unfunded commitments was recorded as "Other" in noninterest expense.

(1) In 2022, unfunded commitments were recorded as "Other" in noninterest expense.

Components of Provision for Credit Losses

The following table summarizes the Provision for credit losses for the three months ended March 31, 2023 and March 31, 2022:

Three Months Ended March 31,

The following table summarizes the Provision for credit losses for the three and six months ended June 30, 2023 and June 30, 2022:

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

2023 2022 2023 2022

(In thousands)

Provision for credit losses (loans) $ 934 $ 229

Provision (credit) for credit losses (loans) $ 2,678 $ ( 1,445 ) $ 3,612 $ ( 1,216 )

(Credit) for credit losses (unfunded commitments) 1

Provision for credit losses $ 826 $ 229

( 99 ) — ( 207 ) —

Provision (credit) for credit losses $ 2,579 $ ( 1,445 ) $ 3,405 $ ( 1,216 )

(1) In 2022, unfunded commitments was recorded as "Other" in noninterest expense.

Shareholders' Equity

The Company has 10,000,000 shares authorized and 7,843,438 shares issued and outstanding at March 31, 2023 and 10,000,000 shares authorized and 7,730,699 shares issued and outstanding at December 31, 2022.

The Company has 10,000,000 shares authorized and 7,829,950 shares issued and outstanding at June 30, 2023 and 10,000,000 shares authorized and 7,730,699 shares issued and outstanding at December 31, 2022.

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

8 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 Co mpany's discretion.

During the three months ended March 31, 2023, the Company purchased no shares of its Common Stock .

During the six months ended June 30, 2023, the Company purchased no shares of its Common Stock .

During 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.

3 unchanged sentences

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

The Company’s total compreh ensive income or loss for the three months ended March 31, 2023 and March 31, 2022 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, 2023 and March 31, 2022:

The Company’s total compreh ensive income or loss for the three and six months ended June 30, 2023 and June 30, 2022 is reported in the Consolidated Statements of Comprehensive Income.

The following tables present the changes in accumulated other comprehensive income (loss) by component, net of tax for the three and six months ended June 30, 2023 and June 30, 2022:

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

(In thousands)

Balance at December 31, 2022 $ ( 6,750 ) $ 6,561 $ ( 189 )

Balance at March 31, 2023 $ ( 6,116 ) $ 4,982 $ ( 1,134 )

Other comprehensive (loss) income before reclassifications, net of tax ( 1,495 ) 1,770 275

1 unchanged sentence

Net other comprehensive (loss) income ( 1,495 ) 913 ( 582 )

Balance at June 30, 2023 $ ( 7,611 ) $ 5,895 $ ( 1,716 )

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

(In thousands)

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

Other comprehensive (loss) income before reclassifications, net of tax ( 1,494 ) 5,212 3,718

Amounts reclassified from accumulated other comprehensive income, net of tax — 336 336

Net other comprehensive (loss) income ( 1,494 ) 5,548 4,054

Balance at June 30, 2022 $ ( 3,546 ) $ 3,891 $ 345

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 ( 861 ) ( 666 ) ( 1,527 )

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

Balance at June 30, 2023 $ ( 7,611 ) $ 5,895 $ ( 1,716 )

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

(In thousands)

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

Other comprehensive (loss) income before reclassifications, net of tax ( 5,197 ) 13,112 7,915

Amounts reclassified from accumulated other comprehensive income, net of tax — 991 991

Net other comprehensive (loss) income ( 5,197 ) 14,103 8,906

Balance at June 30, 2022 $ ( 3,546 ) $ 3,891 $ 345

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

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

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

2023 2022 2023 2022

(In thousands)

11 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(In thousands, except per share data)

16 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 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 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 Bank to effectively maintain Common Equity Tier 1, Tier 1 and total capital ratios of 7.0 %, 8.5 % and 10.5 %, respectively.

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.

The Company is subject to the Federal Reserve Small Bank Holding Company Policy Statement.

The Company will no longer be eligible for the Small Bank Holding Company Policy Statement as of March 2024;

as the Company’s consolidated assets were above $3.0 billion as of June 30, 2023.

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 March 31, 2023, the Bank and Company met all capital adequacy requirements to which they are subject.

As of June 30, 2023, 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 March 31, 2023 and December 31, 2022 were as follows:

The capital amounts and ratios for the Bank and the Company at June 30, 2023 and December 31, 2022 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

March 31, 2023

June 30, 2023

Common Equity Tier 1 Capital to Risk-Weighted Assets $ 305,467 10.34 % $ 206,864 7.00 % $ 192,088 6.50 %

2 unchanged sentences

Tier I Capital to Average Assets 305,467 9.41 % 129,850 4.00 % 162,312 5.00 %

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

Actual Capital

Amount Ratio Amount Ratio Amount Ratio

Bankwell Financial Group, Inc.

March 31, 2023

June 30, 2023

Common Equity Tier 1 Capital to Risk-Weighted Assets $ 247,302 8.36 % $ 207,099 4.50 % N/A N/A

11 unchanged sentences

Tier I Capital to Average Assets 294,926 9.88 % 119,361 4.00 % 149,202 5.00 %

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

Actual Capital

Amount Ratio Amount Ratio Amount Ratio

Bankwell Financial Group, Inc.

9 unchanged sentences

Reserve Requirements on Cash

The Bank was not required to maintain a minimum reserve balance in the Federal Reserve Bank (FRB) at March 31, 2023 or December 31, 2022 as the FRB has waived this requirement due to the COVID-19 pandemic.

At March 31, 2023 and December 31, 2022, deposits consisted of the following:

March 31, 2023 December 31, 2022

The Bank was not required to maintain a minimum reserve balance in the Federal Reserve Bank (FRB) at June 30, 2023 or December 31, 2022.

At June 30, 2023 and December 31, 2022, deposits consisted of the following:

June 30, 2023 December 31, 2022

(In thousands)

7 unchanged sentences

Total deposits $ 2,788,863 $ 2,800,818

Maturities of time certificates of deposit as of March 31, 2023 and December 31, 2022 are summarized below:

March 31, 2023 December 31, 2022

Maturities of time certificates of deposit as of June 30, 2023 and December 31, 2022 are summarized below:

June 30, 2023 December 31, 2022

(In thousands)

2 unchanged sentences

2025 231,314 5,927

After 2028 9,993 —

Total $ 1,327,397 $ 1,226,390

The aggregate amount of individual certificate accounts, with balances of $250,000 or more, was $ 109.3 million at March 31, 2023 and $ 74.6 million at December 31, 2022.

The following table summarizes interest expense on deposits by account type for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

The aggregate amount of individual certificate accounts, with balances of $250,000 or more, was approximately $ 133.8 million at June 30, 2023 and $ 74.6 million at December 31, 2022.

The following table summarizes interest expense on deposits by account type for the three and six months ended June 30, 2023 and 2022:

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

2023 2022 2023 2022

(In thousands)

11 unchanged sentences

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

At March 31, 2023, there were 347,254 shares reserved for future issuance under the 2022 Plan.

At June 30, 2023, there were 360,742 shares reserved for future issuance under the 2022 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 three months ended March 31, 2023.

A summary of the status of outstanding stock options for the three months ended March 31, 2023 is presented below:

Three Months Ended March 31, 2023

There were no options granted during the six months ended June 30, 2023.

A summary of the status of outstanding stock options for the six months ended June 30, 2023 is presented below:

Six Months Ended June 30, 2023

Number of Shares Weighted Average Exercise Price

3 unchanged sentences

Options exercisable at end of period — —

As of March 31, 2023, all awarded options have vested.

As of June 30, 2023, all awarded options have vested.

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 three months ended March 31, 2023:

Three Months Ended March 31, 2023

The following table presents the activity for restricted stock for the six months ended June 30, 2023:

Six Months Ended June 30, 2023

Number of Shares Weighted Average Grant Date Fair Value

7 unchanged sentences

(3) Includes 22,242 shares of performance based restricted stock.

The total fair value of restricted stock awards vested during the three months ended March 31, 2023 was $ 2.1 million.

The Company's restricted stock expense for the three months ended March 31, 2023 and March 31, 2022 was $ 0.7 million and $ 0.5 million, respectively.

At March 31, 2023, there was $ 6.2 million of unrecognized stock compensation expense for restricted stock, expected to be recognized over a weighted average period of 1.8 years.

(4) Includes 5,586 shares of performance based restricted stock.

The total fair value of restricted stock awards vested during the six months ended June 30, 2023 was $ 2.2 million.

The Company's restricted stock expense for the six months ended June 30, 2023 and June 30, 2022 was $ 1.4 million and $ 1.3 million, respectively.

At June 30, 2023, there was $ 5.1 million of unrecognized stock compensation expense for restricted stock, expected to be recognized over a weighted average period of 1.7 years.

Performance Based Restricted Stock :

The Company has 43,567 shares of performance based restricted stock outstanding as of March 31, 2023 pursuant to the Company’s Stock Plans.

The Company has 37,981 shares of performance based restricted stock outstanding as of June 30, 2023 pursuant to the Company’s Stock Plans.

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

4 unchanged sentences

The Company does not use derivatives for speculative purposes.

As of March 31, 2023, the Company was a party to five cash flow swaps, designated as hedging instruments, to add stability to interest expense and to manage its exposure to the variability of the future cash fl ows attributable to the contractually specified interest rates.

As of June 30, 2023, the Company was a party to five cash flow swaps, designated as hedging instruments, to add stability to interest expense and to manage its exposure to the variability of the future cash fl ows 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 cash flow swaps to convert rolling 90 days Federal Home Loan Bank advances or brokered deposits.

2 unchanged sentences

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

The fair value of the terminated swaps totaled $ 151.3 thousand as of March 31, 2023.

The fair value of the terminated swaps totaled $ 147.9 thousand as of June 30, 2023.

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.

4 unchanged sentences

The carrying value of the fair value swap on the Consolidated Balance Sheets will also be adjusted through interest income, based on changes in fair value attributable to changes in the hedged risk.

The following table represents the carrying value of the portfolio layer method hedged asset and the cumulative fair value hedging adjustment included in the carrying value of the hedged asset as of March 31, 2023 and December 31, 2022:

March 31, 2023 December 31, 2022

Carrying Value of Hedged Asset Hedged Asset

June 30, 2023 December 31, 2022 June 30, 2023 December 31, 2022

Carrying Value of Hedged Asset Hedged Items

(In thousands)

2 unchanged sentences

(1) These amounts include the amortized cost basis of closed portfolios of fixed rate loans used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolio anticipated to be outstanding for the designated hedged period.

As of March 31, 2023, the amortized cost basis of the closed portfolio used in this hedging relationship was $ 706.7 million, the cumulative basis adjustments associated with this hedging relationship was $ 2.4 million, and the amount of the designated hedged item was $ 150.0 million.

As of March 31, 2023, the Company has interest rate swaps not designated as hedging instruments, to minimize interest rate risk exposure with loans to clients.

As of June 30, 2023 , the amortized cost basis of the closed portfolio used in this hedging relationship was $ 677.5 million , the cumulative basis adjustments associated with this hedging relationships was $ 1.0 million, and the amount of the designated hedged item was $ 150.0 million.

As of June 30, 2023, the Company has interest rate swaps not designated as hedging instruments, to minimize interest rate risk exposure with loans to clients.

The Company accounts for all non-client related interest rate swaps as either effective cash flow or fair value swaps.

5 unchanged sentences

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.

Information about derivative instruments at March 31, 2023 and December 31, 2022 is as follows:

As of March 31, 2023

Information about derivative instruments at June 30, 2023 and December 31, 2022 is as follows:

As of June 30, 2023

Derivative Assets Derivative Liabilities

8 unchanged sentences

(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 March 31, 2023 totaled $ 0.7 million and is excluded from the fair value p resented in the table above.

The fair value of interest rate swaps in a net asset position, including accrued interest, totaled $ 7.0 million as of March 31, 2023.

The fair value of interest rate swaps in a net liability position, including accrued interest, totaled $ 2.4 million a s of March 31, 2023.

Accrued interest receivables related to interest rate swaps as of June 30, 2023 totaled $ 0.8 million and is excluded from the fair value p resented in the table above.

The fair value of interest rate swaps in a net asset position, including accrued interest, totaled $ 8.2 million as of June 30, 2023.

As of December 31, 2022

8 unchanged sentences

(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.

Accrued interest receivables 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.

7 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 months ended March 31, 2023 and March 31, 2022:

Three Months Ended March 31,

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 six months ended June 30, 2023 and June 30, 2022:

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

(In thousands) 2023 2022 2023 2022

Interest rate swaps designated as cash flow hedges:

Unrealized (gain) loss recognized in accumulated other comprehensive income before reclassifications $ ( 999 ) $ 10,174

Unrealized loss recognized in accumulated other comprehensive income before reclassifications $ 2,297 $ 6,711 $ 1,298 $ 16,885

Amounts reclassified from accumulated other comprehensive income ( 1,112 ) 433 ( 2,094 ) 1,275

Income tax benefit (expense) on items recognized in accumulated other comprehensive income 402 ( 2,461 )

Income tax (expense) benefit on items recognized in accumulated other comprehensive income ( 272 ) ( 1,596 ) 130 ( 4,057 )

Other comprehensive income (loss) $ 913 $ 5,548 $ ( 666 ) $ 14,103

1 unchanged sentence

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 table summarizes the effect of the fair value hedging relationship recognized in the consolidated statements of income for the three months ended March 31, 2023 and March 31, 2022:

Three Months Ended March 31,

The following table summarizes the effect of the fair value hedging relationship recognized in the consolidated statements of income for the three and six months ended June 30, 2023 and June 30, 2022:

Three Months Ended

June 30, Six Months Ended June 30,

(In thousands) 2023 2022 2023 2022

3 unchanged sentences

Total gain recognized in the consolidated statements of income within interest and fees on loans $ 274 $ — $ 325 $ —

The following tables summarize gross and net information about derivative instruments that are offset in the Consolidated Balance Sheets at March 31, 2023 and December 31, 2022:

March 31, 2023

The following tables summarize gross and net information about derivative instruments that are offset in the Consolidated Balance Sheets at June 30, 2023 and December 31, 2022:

June 30, 2023

(In thousands)

4 unchanged sentences

(1) Includes accrued interest receivable totaling $ 710 thousand.

March 31, 2023

June 30, 2023

(In thousands)

34 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 March 31, 2023 and December 31, 2022 were as follows:

March 31, 2023

The carrying values, fair values and placement in the fair value hierarchy of the Company's financial instruments at June 30, 2023 and December 31, 2022 were as follows:

June 30, 2023

Carrying Value Fair Value Level 1 Level 2 Level 3

11 unchanged sentences

Derivative asset 12,220 12,220 — 12,220 —

Assets held for sale — — — — —

Financial Liabilities:

6 unchanged sentences

Subordinated debentures 69,082 61,514 — — 61,514

Servicing liability — — — — —

Derivative liability 4,041 4,041 — 4,041 —

13 unchanged sentences

Derivative asset 12,499 12,499 — 12,499 —

Assets held for sale — — — — —

Financial Liabilities:

41 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 March 31, 2023 and December 31, 2022, 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, 2023 and for the year ended December 31, 2022.

The following table details the financial instruments carried at fair value on a recurring basis at June 30, 2023 and December 31, 2022, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value.

The Company had no transfers into or out of Levels 1, 2 or 3 during the six months ended June 30, 2023 and for the year ended December 31, 2022.

(In thousands) Level 1 Level 2 Level 3

March 31, 2023:

June 30, 2023:

Marketable equity securities $ 2,017 $ — $ —

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 March 31, 2023 and December 31, 2022, 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 June 30, 2023 and December 31, 2022, 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

March 31, 2023:

June 30, 2023:

Individually evaluated loans $ — $ — $ 35,106

$ — $ — $ 40,561

Servicing asset, net — — 950

1 unchanged sentence

Individually evaluated loans $ — $ — $ 41,929

$ — $ — $ 41,929

Servicing asset, net — — 723

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, 2023 and December 31, 2022:

The following table presents information about quantitative inputs and assumptions for Level 3 financial instruments carried at fair value on a nonrecurring basis at June 30, 2023 and December 31, 2022:

Fair Value Valuation Methodology Unobservable Input Range

(Dollars in thousands)

March 31, 2023:

Individually evaluated loans

$ 17,182 Appraisals Discount to appraised value 8.00 %

June 30, 2023:

Individually evaluated loans $ 18,448 Appraisals Discount to appraised value 6.00 - 8.00 %

16,658 Discounted cash flows Discount rate 3.00 - 8.25 %

2 unchanged sentences

December 31, 2022:

Individually evaluated loans

$ 17,477 Appraisals Discount to appraised value 6.00 - 8.00 %

Individually evaluated loans $ 17,477 Appraisals Discount to appraised value 6.00 - 8.00 %

24,452 Discounted cash flows Discount rate 3.00 - 6.75 %

1 unchanged sentence

Prepayment rate 3.00 - 17.00 %

(1) Servicing liabilities totaling $ 0.4 thousand were valued using a discount rate o f 4.5 %.

(1) Servicing liabilities totaling $ 0.5 thousands were valued using a discount rate of 4.0 %.

(2) Servicing liabilities totaling $ 23 thousand were valued using a discount rate of 4.0 %.

13 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 $ 15.5 million of outstanding subordinated debt and for general corporate purposes.

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

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

6 unchanged sentences

The Company used the net proceeds from the sale of the 2022 Notes for general corporate purposes.

The 2022 Notes will bear interest at a fixed rate of 6.0 % per year until August 31, 2027.

The 2022 Notes bears interest at a fixed rate of 6.0 % per year until August 31, 2027.

Thereafter, the interest rate will reset quarterly at a variable rate equal to the then current three-month term SOFR plus 326 basis points.

5 unchanged sentences

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

At March 31, 2023 and December 31, 2022, unamortized debt issuance costs were $ 1.0 million and $ 1.0 million, respectively.

At June 30, 2023 and December 31, 2022, unamortized debt issuance costs were $ 0.9 million and $ 1.0 million, respectively.

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

For the three months ended March 31, 2023 and 2022 the amortization expense for debt issuance costs were $ 62 thousand and $ 30 thousand, respectively, and were recognized as an increase to interest expense on borrowings within the consolidated statements of income.

The Company recognized $ 0.8 million and $ 0.3 million in interest expense related to its subordinated debt for the three month periods ended March 31, 2023 and 2022, respectively.

For the three months ended June 30, 2023 and 2022 the amortization expense for debt issuance costs were $ 62 thousand and $ 29 thousand, respectively, and were recognized as an increase to interest expense on borrowings within the consolidated statements of income.

For the six months ended June 30, 2023 and 2022, the amortization expense for debt issuance costs were $ 123 thousand and $ 59 thousand, respectively.

The Company recognized $ 0.8 million and $ 0.3 million in interest expense related to its subordinated debt for the three month periods ended June 30, 2023 and 2022, respectively.

The Company recognized $ 1.6 million and $ 0.6 million in interest expense related to its subordinated debt for the six month periods ended June 30, 2023 and 2022, respectively.

Subsequent Events

On April 26, 2023, the Company’s Board of Directors declared a $ 0.20 per share cash dividend, payable on May 23, 2023 to shareholders of record on May 12, 2023.

On April 24, 2023, the Bank established a new retail branch located at 300 Atlantic Street, Stamford, CT.

This replaced the branch located at 612 Bedford Street, Stamford, CT, which closed on April 21, 2023.

On July 26, 2023, the Company’s Board of Directors declared a $ 0.20 per share cash dividend, payable on August 24, 2023 to shareholders of record on August 14, 2023.

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