What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-08 compared with 2023-08-09 · 224 added, 182 removed, 1149 unchanged (26% of the section changed)

3 unchanged sentences

(In thousands, except share data)

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Cash and due from banks $ 256,973 $ 344,925

4 unchanged sentences

Available for sale investment securities, at fair value 97,907 103,663

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)

Held to maturity investment securities, at amortized cost (fair values of $ 14,317 and $ 15,435 at September 30, 2023 and December 31, 2022, respectively)

15,885 15,983

Total investment securities 115,767 121,634

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

Loans receivable (net of ACL-Loans of $ 29,284 at September 30, 2023 and $ 22,431 at December 31, 2022)

2,735,242 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 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)

Subordinated debentures (face value of $ 70,000 and $ 70,000 at September 30, 2023 and December 31, 2022, respectively, less unamortized debt issuance costs of $ 857 and $ 1,041 at September 30, 2023 and December 31, 2022, respectively)

69,143 68,959

4 unchanged sentences

Common stock, no par value;

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

10,000,000 shares authorized, 7,841,616 and 7,730,699 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

117,181 115,018

7 unchanged sentences

(In thousands, except share data)

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

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

2023 2022 2023 2022

9 unchanged sentences

Net interest income 22,691 24,601 72,223 67,934

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

(Credit) provision for credit losses ( 1,579 ) 2,381 1,826 1,165

Net interest income after (credit) provision for credit losses 24,270 22,220 70,397 66,769

Noninterest income

28 unchanged sentences

(In thousands)

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

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

2023 2022 2023 2022

1 unchanged sentence

Other comprehensive income:

Unrealized gains (losses) on securities:

Unrealized (losses) gains on securities:

Unrealized holding (losses) gains on available for sale securities ( 752 ) ( 4,439 ) ( 1,941 ) ( 11,130 )

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

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

Net change in unrealized (losses) gains ( 752 ) ( 4,439 ) ( 1,941 ) ( 11,130 )

1 unchanged sentence

Unrealized (losses) gains on securities, net of tax ( 579 ) ( 3,447 ) ( 1,440 ) ( 8,644 )

Unrealized (losses) gains on interest rate swaps:

Unrealized gains (losses) on interest rate swaps:

Unrealized gains (losses) on interest rate swaps 1,001 3,737 205 21,897

Income tax (expense) benefit ( 230 ) ( 835 ) ( 100 ) ( 4,892 )

Unrealized gains (losses) on interest rate swaps, net of tax 771 2,902 105 17,005

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

Total other comprehensive income (loss), net of tax 192 ( 545 ) ( 1,335 ) 8,361

Comprehensive income $ 9,969 $ 8,629 $ 26,804 $ 37,769

4 unchanged sentences

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

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

Net income — — 9,777 — 9,777

3 unchanged sentences

Stock-based compensation expense — 640 — — 640

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

Issuance of restricted stock 11,666 — — — —

1 unchanged sentence

Repurchase of common stock — — — — —

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

Balance at September 30, 2023 7,841,616 $ 117,181 $ 142,205 $ ( 1,524 ) $ 257,862

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

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

Net income — — 9,174 — 9,174

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

Other comprehensive (loss), net of tax — — — ( 545 ) ( 545 )

Cash dividends declared ($ 0.20 per share)

1 unchanged sentence

Stock-based compensation expense — 634 — — 634

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

Warrants exercised — — — — —

2 unchanged sentences

Repurchase of common stock ( 53,546 ) ( 1,703 ) — — ( 1,703 )

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

Balance at September 30, 2022 7,711,843 $ 114,548 $ 117,152 $ ( 200 ) $ 231,500

See accompanying notes to consolidated financial statements (unaudited)

5 unchanged sentences

Net income — — 28,139 — 28,139

Other comprehensive income, net of tax — — — ( 1,527 ) ( 1,527 )

Other comprehensive (loss), net of tax — — — ( 1,335 ) ( 1,335 )

Cash dividends declared ($ 0.60 per share)

5 unchanged sentences

Repurchase of common stock — — — — —

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

Balance at September 30, 2023 7,841,616 $ 117,181 $ 142,205 $ ( 1,524 ) $ 257,862

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

9 unchanged sentences

Repurchase of common stock ( 166,375 ) ( 5,540 ) — — ( 5,540 )

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

Balance at September 30, 2022 7,711,843 $ 114,548 $ 117,152 $ ( 200 ) $ 231,500

See accompanying notes to consolidated financial statements (unaudited)

2 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities

3 unchanged sentences

Provision for credit losses 1,826 1,165

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

Credit for deferred income taxes ( 114 ) ( 441 )

Change in fair value of marketable equity securities 49 217

16 unchanged sentences

Purchases of available for sale securities — ( 22,572 )

Purchases of held to maturity securities ( 50 ) ( 4,990 )

Net increase in loans ( 118,992 ) ( 436,869 )

7 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from financing activities

2 unchanged sentences

Net change in FHLB advances — 40,000

Issuance of subordinated debt — 34,352

Proceeds from exercise of options 155 48

1 unchanged sentence

Repurchase of common stock — ( 5,540 )

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

Net cash (used in) provided by financing activities ( 36,718 ) 226,909

Net decrease in cash and cash equivalents ( 97,584 ) ( 121,560 )

18 unchanged sentences

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.

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

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

27 unchanged sentences

Recently issued accounting pronouncements not yet adopted

2023-06, Disclosure Improvements:

“Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative”:

The amendments in this Update modify the disclosure or presentation requirements of a variety of Topics in the Codification.

Certain of the amendments represent clarifications to or technical corrections of the current requirements.

Because of the variety of Topics amended, a broad range of entities may be affected by one or more of those amendments.

The summary of the amendments applicable to the Company include:

Statement of Cash Flows - Requires an accounting policy disclosure in annual periods of where cash flows associated with derivative instruments and their related gains and losses are presented in the statement of cash flows.

Accounting Changes and Error Corrections - Requires that when there has been a change in the reporting entity, the entity disclose any material prior-period adjustment and the effect of the adjustment on retained earnings in interim financial statements.

Earnings Per Share - Requires disclosure of the methods used in the diluted earnings-per-share computation for each dilutive security and clarifies that certain disclosures should be made during interim periods.

Amends illustrative guidance to illustrate

disclosure of the methods used in the diluted earnings-per-share computation.

Interim Reporting - Conforms to the amendments made to Topic 250 (Accounting Changes and Error Correction).

Commitments - Requires disclosure of assets mortgaged, pledged, or otherwise subject to lien and the obligations collateralized.

Debt - Requires disclosure of amounts and terms of unused lines of credit and unfunded commitments and the weighted-average interest rate on outstanding short-term borrowings.

Entities that are not public business entities are not required to provide information about the weighted-average interest rate.

Equity - Requires entities that issue preferred stock to disclose preference in involuntary liquidation if the liquidation preference is other than par or stated value.

Derivatives - Adds cross-reference to disclosure requirements related to where cash flows associated with derivative instruments and their related gains and losses are presented in the statement of cash flows in Topic 230.

Transfers and Servicing—Secured Borrowing and Collateral - Requires:

That accrued interest be included in the disclosure of liabilities incurred in securities borrowing or repurchase or resale transactions.

Separate presentation of the aggregate carrying amount of reverse repurchase agreements on the face of the balance sheet if that amount exceeds 10 percent of total assets.

Disclosure of the weighted-average interest rates of repurchase liabilities for public business entities.

Disclosure of amounts at risk with an individual counterparty if that amount exceeds more than 10 percent of shareholder’s equity.

Disclosure for reverse repurchase agreements that exceed 10 percent of total assets on whether there are any provisions in a reverse repurchase agreement to ensure that the market value of the underlying assets remains sufficient.

to protect against counterparty default and, if so, the nature of those provisions.

Financial Services - Requires that investment companies disclose the components of capital on the balance sheet.

For entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited.

For all other entities, the amendments will be effective two years later.

The amendments in this Update should be applied prospectively.

For all entities, if by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending

content of the related amendment will be removed from the Codification and will not become effective for any entity.

The Company believes this ASU will not have a material impact on existing disclosures and will continue to monitor for SEC action, and plan accordingly for adoption.

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

36 unchanged sentences

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.

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

The Company determined these housing authority bonds had 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 consisted 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 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.

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

Government and had minimal risk of loss.

The Corporate Securities had minimal default risk.

As such, management concluded that no allowance for expected credit losses

was required for the Held to maturity investment securities or the Available for sale investment securities upon adoption of the standard on January 1, 2023.

Change in Consolidated Statement of Conditions Tax Effected Change to Retained Earnings from Adoption of CECL

25 unchanged sentences

Investment Securities

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

June 30, 2023

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

September 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 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.

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

At September 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 September 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 September 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 Community Reinvestment Act ("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 June 30, 2023 and December 31, 2022:

Length of Time in Continuous Unrealized Loss Position

5 unchanged sentences

(Dollars in thousands)

June 30, 2023

September 30, 2023

Government and agency obligations $ 9,667 $ ( 121 ) 0.13 % $ 74,044 $ ( 7,705 ) 8.42 % $ 83,711 $ ( 7,826 ) 8.55 %

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-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.

There were thirty-seven and thirty-six available for sale securities or held to maturity securities as of September 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.

Government or guaranteed by the U.S.

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.

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 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.

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

The Company has the intent and ability to retain its investment securities in an unrealized loss position at September 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 June 30, 2023 and December 31, 2022:

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

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

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

Real estate loans:

10 unchanged sentences

Loans receivable, net $ 2,735,242 $ 2,646,384

(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.

(1) The September 30, 2023 and December 31, 2022 balances in clude $ 23 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 primarily consist of commercial real estate loans, commercial business loans and, to a lesser degree, consumer loans.

Loans may also be granted for the construction of commercial properties.

7 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.

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.

The Company does not provide first or second lien 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)

21 unchanged sentences

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.

This portfolio segment includes loans secured by savings or certificate accounts, 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 and six months ended June 30, 2023 and 2022, by portfolio segment:

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

Residential Real Estate Commercial Real Estate Construction Commercial Business Consumer Total

(In thousands)

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

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

5 unchanged sentences

(In thousands)

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

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

5 unchanged sentences

(In thousands)

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

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

7 unchanged sentences

(In thousands)

Six Months Ended June 30, 2022

Nine Months Ended September 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 June 30, 2023 and December 31, 2022 (dollars in thousands):

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

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

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

2023 2022 2021 2020 2019 Prior Total

95 unchanged sentences

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

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

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

Portfolio ACL-Loans

(In thousands)

June 30, 2023

September 30, 2023

Loans individually evaluated for impairment:

3 unchanged sentences

Commercial business 9,352 12

Consumer 35,894 —

Subtotal 82,203 1,653

27 unchanged sentences

This risk rating represents an assessed level of a 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 ACL-Loans.

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

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 ACL-Loans.

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

Risk ratings of (1) through (5) are "pass" categories and risk ratings of (6) through (9) are criticized asset categories as defined by the regulatory agencies.

6 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 watchlist and watched asset report process.

They are reviewed on an ongoing basis through the annual loan review process performed by Company personnel, normal renewal activity, monthly delinquency monitoring, and the quarterly watchlist 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.

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

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

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

Commercial Credit Quality Indicators

June 30, 2023 December 31, 2022

September 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

June 30, 2023 December 31, 2022

September 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 June 30, 2023 and December 31, 2022:

June 30, 2023

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

September 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 June 30, 2023 or December 31, 2022.

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

Loans on nonaccrual status

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

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

September 30, 2023 December 31, 2022

(In thousands)

3 unchanged sentences

Construction 9,382 9,382

Consumer 7,917 —

Total $ 27,957 $ 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 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.

Interest income on loans that would have been recognized if loans on nonaccrual status had been current in accordance with their original terms for the nine months ended September 30, 2023 and 2022 was $ 5.1 million and $ 0.7 million, respectively.

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

At September 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 $ 24.9 million and $ 14.7 million at September 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 June 30, 2023 and December 31, 2022:

Beginning in the third quarter of 2023, the Company individually evaluated all insurance premium loans within the Consumer portfolio segment, irrespective of credit risk ratings.

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

Carrying Amount Unpaid Principal Balance Associated ACL-Loans

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

September 30, 2023 December 31, 2022 September 30, 2023 December 31, 2022 September 30, 2023 December 31, 2022

(In thousands)

4 unchanged sentences

Commercial business 6,261 2,551 6,718 2,793 — —

Consumer 35,894 — 36,206 — — —

Total individually evaluated loans without a valuation allowance 57,184 18,561 58,427 19,387 — —

2 unchanged sentences

Commercial real estate 21,928 22,511 21,928 22,511 1,641 754

Construction — — — — — —

Commercial business 3,091 1,758 3,091 1,758 12 147

Consumer — — — — — —

Total individually evaluated loans with a valuation allowance 25,019 24,269 25,019 24,269 1,653 901

Total individually evaluated loans $ 82,203 $ 42,830 $ 83,446 $ 43,656 $ 1,653 $ 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 and six months ended June 30, 2023 and 2022:

The following table summarizes the average carrying amount of individually evaluated impaired loans and interest income recognized on individually evaluated loans by portfolio segment for the three and nine months ended September 30, 2023 and 2022:

Average Carrying Amount Interest Income Recognized

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

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

2023 2022 2023 2022

(In thousands)

Individually evaluated loans without a valuation allowance:

Individually evaluated impaired loans without a valuation allowance:

Residential real estate $ 3,760 $ 3,864 $ 28 $ 21

2 unchanged sentences

Construction 9,382 9,382 — —

Total individually evaluated loans without a valuation allowance 19,984 13,716 60 5

Individually evaluated loans with a valuation allowance:

Consumer 8,981 — — —

Total individually evaluated impaired loans without a valuation allowance 30,410 16,913 76 27

Individually evaluated impaired loans with a valuation allowance:

Residential real estate $ — $ — $ — $ —

Commercial real estate 21,934 24,419 87 148

Construction — — — —

Commercial business 3,092 2,000 — 20

Total individually evaluated loans with a valuation allowance 15,890 28,186 87 164

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

Consumer — — — —

Total individually evaluated impaired loans with a valuation allowance 25,026 26,419 87 168

Total individually evaluated impaired loans $ 55,436 $ 43,332 $ 163 $ 195

Average Carrying Amount Interest Income Recognized

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

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

2023 2022 2023 2022

(In thousands)

Individually evaluated loans without a valuation allowance:

Individually evaluated impaired loans without a valuation allowance:

Residential real estate $ 3,798 $ 3,901 $ 68 $ 45

2 unchanged sentences

Construction 9,382 9,266 — —

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

Individually evaluated loans with a valuation allowance:

Consumer 7,144 — — —

Total individually evaluated impaired loans without a valuation allowance 27,300 16,957 200 61

Individually evaluated impaired loans with a valuation allowance:

Residential real estate $ — $ — $ — $ —

Commercial real estate 21,996 24,439 260 426

Commercial business 1,470 2,098 — 48

Construction — — — —

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

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

Consumer — — — —

Total individually evaluated impaired loans with a valuation allowance 23,466 26,537 260 474

Total individually evaluated impaired loans $ 50,766 $ 43,494 $ 460 $ 535

Loan Modifications

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.

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

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

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

There were no new loan modifications reportable under ASU 2022-02 at September 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.

3 unchanged sentences

(Dollars in thousands) 2023 2022 2023 2022 2023 2022

Three Months Ended June 30,

Three Months Ended September 30,

Residential real estate — — $ — $ — $ — $ —

4 unchanged sentences

(Dollars in thousands) 2023 2022 2023 2022 2023 2022

Six Months Ended June 30,

Nine Months Ended September 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 and six months ended June 30, 2023 and June 30, 2022.

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

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

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

2023 2022 2023 2022

7 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 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,

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

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

2023 2022 2023 2022

8 unchanged sentences

Components of Provision for Credit Losses

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,

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

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

2023 2022 2023 2022

(In thousands)

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

(Credit) provision for credit losses (loans) $ ( 1,433 ) $ 2,381 $ 2,179 $ 1,165

(Credit) for credit losses (unfunded commitments) 1

( 146 ) — ( 353 ) —

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

(Credit) provision for credit losses $ ( 1,579 ) $ 2,381 $ 1,826 $ 1,165

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

Shareholders' Equity

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.

The Company has 10,000,000 shares authorized and 7,841,616 shares issued and outstanding at September 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 Market under the ticker symbol BWFG.

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

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

During the nine months ended September 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 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:

The Company’s total compreh ensive income or loss for the three and nine months ended September 30, 2023 and September 30, 2022 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 three and nine months ended September 30, 2023 and September 30, 2022:

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

(In thousands)

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

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

Other comprehensive (loss) income before reclassifications, net of tax ( 579 ) 1,718 1,139

1 unchanged sentence

Net other comprehensive (loss) income ( 579 ) 771 192

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

Balance at September 30, 2023 $ ( 8,190 ) $ 6,666 $ ( 1,524 )

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 )

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

Other comprehensive (loss) income before reclassifications, net of tax ( 3,447 ) 3,095 ( 352 )

1 unchanged sentence

Net other comprehensive (loss) income ( 3,447 ) 2,902 ( 545 )

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

Balance at September 30, 2022 $ ( 6,993 ) $ 6,793 $ ( 200 )

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 ( 1,440 ) 105 ( 1,335 )

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

Balance at September 30, 2023 $ ( 8,190 ) $ 6,666 $ ( 1,524 )

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 ( 8,644 ) 17,005 8,361

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

Balance at September 30, 2022 $ ( 6,993 ) $ 6,793 $ ( 200 )

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

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

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

2023 2022 2023 2022

11 unchanged sentences

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

Three Months Ended

June 30, Six Months Ended

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

2023 2022 2023 2022

20 unchanged sentences

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.

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 June 30, 2023, the Bank and Company met all capital adequacy requirements to which they are subject.

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

The capital amounts and ratios for the Bank and the Company at September 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

June 30, 2023

September 30, 2023

Common Equity Tier 1 Capital to Risk-Weighted Assets $ 313,861 10.82 % $ 202,990 7.00 % $ 188,491 6.50 %

6 unchanged sentences

Bankwell Financial Group, Inc.

June 30, 2023

September 30, 2023

Common Equity Tier 1 Capital to Risk-Weighted Assets $ 256,124 8.85 % $ 130,301 4.50 % N/A N/A

25 unchanged sentences

Reserve Requirements on Cash

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

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

June 30, 2023 December 31, 2022

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

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

September 30, 2023 December 31, 2022

(In thousands)

7 unchanged sentences

Total deposits $ 2,768,626 $ 2,800,818

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

June 30, 2023 December 31, 2022

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

September 30, 2023 December 31, 2022

(In thousands)

4 unchanged sentences

Total $ 1,339,289 $ 1,226,390

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,

The aggregate amount of individual certificate accounts, with balances of $250,000 or more, was approximately $ 140.8 million at September 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 nine months ended September 30, 2023 and 2022:

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

2023 2022 2023 2022

12 unchanged sentences

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

At June 30, 2023, there were 360,742 shares reserved for future issuance under the 2022 Plan.

At September 30, 2023, there were 349,076 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 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

There were no options granted during the nine months ended September 30, 2023.

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

Nine Months Ended September 30, 2023

Number of Shares Weighted Average Exercise Price

3 unchanged sentences

Options exercisable at end of period — —

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

As of September 30, 2023, all awarded options have been exercised.

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 six months ended June 30, 2023:

Six Months Ended June 30, 2023

The following table presents the activity for restricted stock for the nine months ended September 30, 2023:

Nine Months Ended September 30, 2023

Number of Shares Weighted Average Grant Date Fair Value

8 unchanged sentences

(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.

The total fair value of restricted stock awards vested during the nine months ended September 30, 2023 was $ 2.4 million.

The Company's restricted stock expense for the nine months ended September 30, 2023 and September 30, 2022 was $ 2.0 million and $ 1.9 million, respectively.

At September 30, 2023, there was $ 4.7 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 37,981 shares of performance based restricted stock outstanding as of June 30, 2023 pursuant to the Company’s Stock Plans.

The Company has 36,315 shares of performance based restricted stock outstanding as of September 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 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.

As of September 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 - day Federal Home Loan Bank advances or brokered deposits.

Cash flow swaps with a positive fair value are recorded as other assets and cash flow swaps with a negative fair value are recorded as other liabilities on the Consolidated Balance Sheets.

1 unchanged sentence

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

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

The fair value of the terminated swaps totaled $ 144.5 thousand as of September 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.

The Company entered into one pay-fixed portfolio layer method fair value swap, designated as a hedging instrument, with a total notional amount of $ 150 million in the first quarter of 2023.

The Company is designating the fair value swap under the portfolio layer method (“PLM”).

The Company designated the fair value swap under the portfolio layer method (“PLM”).

Under this method, the hedged item is designated as a hedged layer of a closed portfolio of financial loans that is anticipated to remain outstanding for the designated hedged period.

1 unchanged sentence

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 June 30, 2023 and December 31, 2022:

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

September 30, 2023 December 31, 2022 September 30, 2023 December 31, 2022

Carrying Value of Hedged Asset Hedged Items

3 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 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.

As of September 30, 2023 , the amortized cost basis of the closed portfolio used in this hedging relationship was $ 654.5 million , the cumulative basis adjustments associated with this hedging relationships was $ 1.7 million , and the amount of the designated hedged item was $ 150.0 million.

As of September 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 June 30, 2023 and December 31, 2022 is as follows:

As of June 30, 2023

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

As of September 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 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.

Accrued interest receivables related to interest rate swaps as of September 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 $ 9.3 million as of September 30, 2023.

As of December 31, 2022

18 unchanged sentences

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

Changes in the consolidated statements of comprehensive income (loss) related to interest rate derivatives designated as hedges of cash flows were as follows for the three and six months ended June 30, 2023 and June 30, 2022:

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

Changes in the consolidated statements of comprehensive income (loss) related to interest rate derivatives designated as hedges of cash flows were as follows for the three and nine months ended September 30, 2023 and September 30, 2022:

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

(In thousands) 2023 2022 2023 2022

3 unchanged sentences

Income tax (expense) benefit on items recognized in accumulated other comprehensive income ( 230 ) ( 835 ) ( 100 ) ( 4,892 )

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

Other comprehensive income $ 771 $ 2,902 $ 105 $ 17,005

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

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

The following 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:

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

Three Months Ended

June 30, Six Months Ended June 30,

September 30, Nine Months Ended September 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 $ 387 $ — $ 711 $ —

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

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

September 30, 2023

(In thousands)

4 unchanged sentences

(1) Includes accrued interest receivable totaling $ 756 thousand.

June 30, 2023

September 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 June 30, 2023 and December 31, 2022 were as follows:

June 30, 2023

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

September 30, 2023

Carrying Value Fair Value Level 1 Level 2 Level 3

77 unchanged sentences

Financial instruments measured at fair value on a recurring basis

The following table details the financial instruments carried at fair value on a recurring basis at June 30, 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.

The following table details the financial instruments carried at fair value on a recurring basis at September 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 nine months ended September 30, 2023 and for the year ended December 31, 2022.

(In thousands) Level 1 Level 2 Level 3

June 30, 2023:

September 30, 2023:

Marketable equity securities $ 1,975 $ — $ —

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 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 following table details the financial instruments measured at fair value on a nonrecurring basis at September 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

June 30, 2023:

September 30, 2023:

Individually evaluated loans $ — $ — $ 80,550

3 unchanged sentences

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 June 30, 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 September 30, 2023 and December 31, 2022:

Fair Value Valuation Methodology Unobservable Input Range

(Dollars in thousands)

June 30, 2023:

September 30, 2023:

Individually evaluated loans $ 22,292 Appraisals Discount to appraised value 8.00 %

35,894 Appraisals, cash surrender value life insurance, securities, cash held as collateral Discounts to appraised value and securities value — % - 8.00 %

24,017 Discounted cash flows Discount rate 3.00 - 10.50 %

6 unchanged sentences

Prepayment rate 3.00 - 17.00 %

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

(1) 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 the 2015 Notes and for general purposes.

The Company used the net proceeds to repay the $ 15.5 million principal balance of subordinated notes issued in 2015 for general corporate 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 bears interest at a fixed rate of 6.0 % per year until August 31, 2027.

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

At September 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 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.

For the three months ended September 30, 2023 and 2022 the amortization expense for debt issuance costs were $ 62 thousand and $ 45 thousand, respectively, and were recognized as an increase to interest expense on borrowings within the Consolidated Statements of Income.

For the nine months ended September 30, 2023 and 2022, the amortization expense for debt issuance costs were $ 185 thousand and $ 104 thousand, respectively.

The Company recognized $ 0.8 million and $ 0.5 million in interest expense related to its subordinated debt for the three-month periods ended September 30, 2023 and 2022, respectively.

The Company recognized $ 2.4 million and $ 1.1 million in interest expense related to its subordinated debt for the nine-month periods ended September 30, 2023 and 2022, respectively.

Subsequent Events

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.

On October 25, 2023, the Company’s Board of Directors declared a $ 0.20 per share cash dividend, payable on November 20, 2023 to shareholders of record on November 10, 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