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economic growth.
−Removed: Weak economic conditions are characterized by deflation, fluctuations in debt and equity capital markets, a lack of liquidity and/or depressed prices in the secondary market for mortgage loans, increased delinquencies on mortgage, consumer and commercial loans, residential and commercial real estate price declines and lower home sales and commercial activity.
+Added: Weak economic conditions are characterized by deflation, fluctuations in debt and equity capital markets, a lack of liquidity and/or depressed prices in the
+Added: secondary market for mortgage loans, increased delinquencies on mortgage, consumer and commercial loans, residential and commercial real estate price declines and lower home sales and commercial activity.
All of these factors are detrimental to our business, and the interplay between these factors can be complex and unpredictable.
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In addition, our regulators, as an integral part of their examination process, review our loans and the adequacy of our ACL-Loans and may direct us to make additions to our ACL-Loans based on their judgments about information available to them at the time of their examination.
−Removed: If actual charge-offs in future periods exceed the amounts allocated to our ACL-Loans, we may need additional provision for loan losses to restore the adequacy of our ACL-Loans.
+Added: If actual charge-offs in future periods exceed the amounts allocated to our ACL-Loans, we may need additional provision for credit losses to restore the adequacy of our ACL-Loans.
If we are required to materially increase our level of ACL-Loans for any reason, such increase could have a material adverse effect on our business, financial condition, results of operations and future prospects.
Our concentration of large loans to certain borrowers may increase our credit risk.
−Removed: As of December 31, 2023, our five largest relationships ranged in exposure from approximately $85.0 million to $92.0 million.
+Added: As of December 31, 2024, our five largest relationships ranged in exposure from approximat ely $80.0 million to $94.0 million.
In addition to other typical risks related to any loan, such as deterioration of the collateral securing the loans, this high concentration of borrowers presents a risk to our lending operations.
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Non-owner-occupied commercial real estate loans generally involve relatively large balances to single borrowers or related groups of borrowers.
−Removed: Accordingly, charge-offs on non-owner occupied commercial real estate loans may be larger on a per loan basis than those incurred with our residential or consumer loan portfolios.
+Added: Accordingly, charge-
+Added: offs on non-owner occupied commercial real estate loans may be larger on a per loan basis than those incurred with our residential or consumer loan portfolios.
Commercial loans are typically based on the borrowers’ ability to repay the loans from the cash flow of their businesses.
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Our underwriting, review and monitoring cannot eliminate all of the risks related to these loans.
−Removed: Unexpected deterioration in the credit quality of our commercial real estate loan, commercial loan or construction loan portfolios would require us to increase our provision for loan losses, which would reduce our profitability and could have a material adverse effect on our business, financial condition, results of operations and future prospects.
+Added: Unexpected deterioration in the credit quality of our commercial real estate loan, commercial loan or construction loan portfolios would require us to increase our provision for credit losses, which would reduce our profitability and could have a material adverse effect on our business, financial condition, results of operations and future prospects.
Lack of seasoning of our loan portfolio could increase risk of credit defaults in the future.
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The sale of real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended.
−Removed: A decline in real estate values c ould impair the value of our collateral and our ability to sell the
−Removed: collateral upon any foreclosure, which would likely require us to increase our ACL-Loans.
+Added: A decline in real estate values c ould impair the value of our collateral and our ability to sell the collateral upon any foreclosure, which would likely require us to increase our ACL-Loans.
In the event of a default with respect to any of these loans, the amounts we receive upon sale of the collateral may be insufficient to recover the outstanding principal and interest on the loan.
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Our profitability, like that of most financial institutions, depends to a large extent on our net interest income, which is the difference between our interest income on interest-earning assets, such as loans and investment securities, and our interest expense on interest bearing liabilities, such as deposits and borrowings.
−Removed: Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the FRB.
−Removed: During the 2022-2023 cycle, the FRB increased the target range for the federal funds rate 11 times to slow inflation but has held such rates steady at 5.25%-5.50% since July 2023, citing several factors, including reduced inflationary pressure and steady job and wage growth.
−Removed: Changes in monetary policy, including changes in interest rates, influences not only the interest we receive on loans and securities and the interest we pay on deposits and borrowings, but such changes could also affect our ability to originate loans and obtain deposits, the fair value of our financial assets and liabilities, and the average duration of our assets.
−Removed: If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore net income, could be adversely affected.
−Removed: A prolonged period of extremely volatile and unstable market conditions may increase our funding costs and negatively affect market risk mitigation strategies.
−Removed: Further, any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our business, financial condition, results of operations and future prospects.
+Added: Interest rates are highly sensitive to numerous factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies, most notably the FRB through the Federal Open Market Committee.
+Added: Beginning in 2022, the FRB initiated an aggressive monetary tightening cycle to combat rising inflation, resulting in a significant and rapid increase in the federal funds rate.
+Added: This tightening cycle culminated in the target federal funds rate
+Added: range reaching a high of 5.25%-5.50%.
+Added: While the FRB subsequently decreased the target range by 100 basis points in 2024, citing factors such as moderating inflationary pressures and continued job and wage growth, the cumulative effect of the prior increases continued to shape the interest rate environment.
+Added: Changes in monetary policy, particularly changes in interest rates, influence the interest we earn on loans and securities, the interest we pay on deposits and borrowings, and our ability to originate loans and attract deposits.
+Added: Furthermore, such changes affect the fair value of our financial assets and liabilities, as well as the average duration of our assets.
+Added: If interest rates paid on deposits and other borrowings increase faster than the interest rates we receive on loans and other investments, our net interest income, and consequently our net income, could be adversely affected.
+Added: Periods of market volatility and instability may increase our funding costs and negatively affect our market risk mitigation strategies.
+Added: Any substantial, unexpected, or prolonged change in market interest rates could have a material adverse effect on our business, financial condition, results of operations, and future prospects.
In addition, increased interest rates could also have a negative impact on our results of operations by reducing the ability of borrowers to repay their current loan obligations.
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Numerous commercial banks, savings banks and savings associations maintain offices or are headquartered in or near our market area.
−Removed: Commercial banks, savings banks, savings associations, money market funds, mortgage brokers, finance companies, credit unions, insurance companies, investment firms and private lenders compete with us for various segments of our business.
+Added: Commercial banks, savings banks, savings associations, money market funds, mortgage brokers, finance companies, credit unions, insurance companies, investment firms and private lenders compete with us for various components of our business.
These competitors often have far greater resources than we do and are able to conduct more intensive and broader based promotional efforts to reach both commercial and individual clients.
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We rely on communication and information systems to conduct business, many of which are provided by third-party providers.
−Removed: Potential failures, interruptions or breaches in system security could result in disruptions or failures in our key systems, such as general ledger, deposit or loan systems as well as online banking.
+Added: Potential failures, interruptions or breaches in system security could result in disruptions or failures in our key systems, such as general ledger, deposit or loan systems as well as online banking, including our online account opening channel, Bankwell Direct.
The risk of electronic fraudulent activity within the financial services industry, especially in the commercial banking sector due to cyber criminals targeting bank accounts and other client information is on the rise.
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The occurrence of any failures, interruptions, or security breaches, including cyber-attacks of our information systems and those of our third-party providers could damage our reputation, result in the loss of business, subject us to increased regulatory scrutiny or to civil litigation and possible financial liability, any of which could have an adverse effect on our results of operation and financial condition.
−Removed: Unauthorized access, cyber-crime, artificial intelligence, and other threats to data security may require significant resources, harm our reputation, and adversely affect our business.
+Added: Unauthorized access, cyber-crime, and other threats to data security, including those posed by artificial intelligence, may require significant resources, harm our reputation, and adversely affect our business.
We necessarily collect, use and hold personal and financial information concerning individuals and businesses with which we have a banking relationship.
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As a financial institution, we are inherently exposed to risk in the form of theft and other fraudulent activities by clients, vendors, bad actors, and/or employees targeting the Bank or our clients.
−Removed: Such activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering, and other dishonest acts.
−Removed: The increasing sophistication of fraudulent activity from possible perpetrators could damage our reputation, result in the loss of business, subject us to increased regulatory scrutiny or to civil litigation and possible financial liability, any of which could have an adverse effect on our results of operation and financial condition.
−Removed: To mitigate this risk, we maintain effective policies and internal controls along with ongoing employee training to identify and prevent such incidents.
+Added: These activities can manifest in many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering, and other dishonest acts.
+Added: The increasing sophistication of fraudulent activity could damage our reputation, result in the loss of business, subject us to increased regulatory scrutiny or to civil litigation and possible financial liability.
+Added: Any of these outcomes could have an adverse effect on our results of operation and financial condition.
+Added: To mitigate these risks, we maintain effective policies and internal controls, leverage technology, and provide ongoing employee training focused on identifying and preventing such incidents.
We may be unsuccessful in identifying and completing the acquisition of whole financial institutions or related lines of business.
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The effects of climate change continue to create an alarming level of concern for the state of the global environment.
−Removed: As a result, the global business community has increased its political and social awareness surrounding the issue, and the United States has entered into international agreements in an attempt to reduce global temperatures, such as the Paris Agreement.
+Added: As a result, the global business community has increased its political and social awareness surrounding the issue.
Further, U.S.
Congress, state legislatures and federal and state regulatory agencies continue to propose numerous initiatives to supplement the global effort to combat climate change.
−Removed: Similar and even more expansive initiatives are expected under the current administration, including potentially increasing supervisory expectations with respect to banks’ risk management practices, accounting for the effects of climate change in stress testing scenarios and systemic risk assessments, revising expectations for credit portfolio concentrations based on climate-related factors and encouraging investment by banks in climate-related initiatives and lending to communities disproportionately impacted by the effects of climate change.
The lack of empirical data surrounding the credit and other financial risks posed by climate change render it impossible to predict how specifically climate change may impact our financial condition and results of operations;
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Any regulatory action against us could have a material adverse effect on our business, results of operations, financial condition and future prospects.
−Removed: Pursuant to the Economic Relief Act, the Federal Reserve Board raised the asset threshold under its Small Bank Holding Company Policy Statement from $1 billion to $3 billion for bank or savings and loan holding companies are permitted to have debt levels higher than would be permitted for larger holding companies, provided that such companies meet certain other conditions such as not engaging in significant nonbanking activities.
−Removed: As of June 30, 2023, the Company no longer met the definition of a Small Bank Holding Company as the Company's assets exceeded $3 billion.
−Removed: Effective March 31, 2024, the Company will be subject to the larger company capital requirements as set forth in the Economic Growth Act.
The Bank’s FDIC deposit insurance premiums and assessments may increase.
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The rules for management to assess the Bank’s internal controls over financial reporting are complex, and require significant documentation, testing and possible remediation.
−Removed: The effort to comply with regulatory requirements relating to internal controls cause us to incur increased expenses and a diversion of management’s time and other internal resources.
+Added: The effort to comply with regulatory requirements relating to internal controls causes us to incur increased expenses and diverts management’s time and other internal resources.
If the Bank cannot favorably assess the effectiveness of its internal controls over financial reporting, or if its independent registered public accounting firm is unable to provide an unqualified attestation report on the Bank’s internal controls, the price of our common stock as well as investor confidence could be adversely affected and we may be subject to additional regulatory scrutiny.
42 unchanged sentences
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.