Bankwell Financial Group Inc

Previous wording

Net income available to common shareholders was $1.1 million, or $0.14 per diluted share, and $8.0 million, or $1.02 per diluted share, for the three months ended June 30, 2024 and 2023, respectively. Net income available to common shareholders was $4.9 million, or $0.62 per diluted share, and $18.4 million, or $2.34 per diluted share, for the six months ended June 30, 2024 and 2023, respectively. The decrease in net income for the quarter and six months ended June 30, 2024 was primarily due to the aforementioned decrease in revenues and an increase in provision for credit losses.

Current wording

Net income available to common shareholders was $1.9 million, or $0.24 per diluted share, and $9.8 million, or $1.25 per diluted share, for the three months ended September 30, 2024 and 2023, respectively. Net income available to common shareholders was $6.8 million, or $0.86 per diluted share, and $28.1 million, or $3.58 per diluted share, for the nine months ended September 30, 2024 and 2023, respectively. The decrease in net income for the three and nine months ended September 30, 2024 was primarily due to an increase in the provision for credit losses and an increase in interest expense. This decrease was partially offset by an increase in interest on loans due to higher overall loan yields.

Previous wording

Returns on average shareholders' equity and average assets for the three months ended June 30, 2024 were 1.65% and 0.14%, respectively, compared to 12.91% and 0.99%, respectively, for the three months ended June 30, 2023. Returns on average shareholders' equity and average assets for the six months ended June 30, 2024 were 3.61% and 0.31%, respectively, compared to 15.15% and 1.14%, respectively, for the six months ended June 30, 2023.

Current wording

Returns on average shareholders' equity and average assets for the three months ended September 30, 2024 were 2.83% and 0.24%, respectively, compared to 15.19% and 1.19%, respectively, for the three months ended September 30, 2023. Returns on average shareholders' equity and average assets for the nine months ended September 30, 2024 were 3.35% and 0.29%, respectively, compared to 15.16% and 1.16%, respectively, for the nine months ended September 30, 2023.

Previous wording

Net interest income is the difference between interest earned on loans and securities and interest paid on deposits and other borrowings, and is the primary source of our operating income. Net interest income is affected by the level of interest rates, changes in interest rates and changes in the amount and composition of interest earning assets and interest bearing liabilities. Included in interest income are certain loan fees, such as deferred origination fees and late charges. We convert tax-exempt income to a fully taxable equivalent ("FTE") basis using the statutory federal income tax rate adjusted for applicable state income taxes net of the related federal tax benefit. The average balances are principally daily averages. Interest income on loans includes the effect of deferred loan fees and costs accounted for as yield adjustments. Premium amortization and discount accretion are included in the respective interest income and interest expense amounts.

Current wording

Net interest income is the difference between interest earned on loans, securities, and cash less interest paid on deposits and other borrowings, and is the primary source of our operating income. Net interest income is affected by the level of interest rates, changes in interest rates and changes in the amount and composition of interest earning assets and interest bearing liabilities. Included in interest income are certain loan fees, such as deferred origination fees and late charges. We convert tax-exempt income to a fully taxable equivalent ("FTE") basis using the statutory federal income tax rate adjusted for applicable state income taxes net of the related federal tax benefit. The average balances are principally daily averages. Interest income on loans includes the effect of deferred loan fees and costs accounted for as yield adjustments. Premium amortization and discount accretion are included in the respective interest income and interest expense amounts.

Previous wording

FTE net interest income for the three months ended June 30, 2024 and 2023 was $21.3 million and $24.1 million, respectively. FTE net interest income for the six months ended June 30, 2024 and 2023 was $42.5 million and $49.6 million, respectively.

Current wording

FTE net interest income for the three months ended September 30, 2024 and 2023 was $20.8 million and $22.7 million, respectively. FTE net interest income for the nine months ended September 30, 2024 and 2023 was $63.3 million and $72.4 million, respectively.

Previous wording

FTEinterest income for the three months ended June 30, 2024 increased by $1.1 million, or 2.3%, to $47.7 million, compared to FTE interest income for the three months ended June 30, 2023. FTE interest income for the six months ended June 30, 2024 increased by $5.2 million, or 5.7%, to $96.1 million, compared to FTE interest income for the six months ended June 30, 2023. This increase was due to an increase in interest and fees on loans due to higher overall loan yields.

Current wording

FTE interest income for the three months ended September 30, 2024 remained flat at $48.3 million, compared to FTE interest income for the three months ended September 30, 2023. FTE interest income for the nine months ended September 30, 2024 increased by $5.2 million, or 3.7%, to $144.4 million, compared to FTE interest income for the nine months ended September 30, 2023. This increase was due to an increase in interest and fees on loans due to higher overall loan yields.

Previous wording

Interest expense for the three months ended June 30, 2024 increased by $3.9 million compared to interest expense for the three months ended June 30, 2023. Interest expense for the six months ended June 30, 2024 increased by $12.3 million compared to interest expense for the six months ended June 30, 2023. The increase in interest expense for the three and six months ended June 30, 2024 was driven by an increase in interest expense on deposits, resulting from an increase in rates on interest bearing deposits.

Current wording

Interest expense for the three months ended September 30, 2024 increased by $1.9 million compared to interest expense for the three months ended September 30, 2023. Interest expense for the nine months ended September 30, 2024 increased by $14.2 million compared to interest expense for the nine months ended September 30, 2023. The increase in interest expense for the three and nine months ended September 30, 2024 was driven by an increase in rates on interest bearing deposits.

Previous wording

The following tables present the average balances and yields earned on interest earning assets and average balances and weighted average rates paid on our funding liabilities for the three and six months ended June 30, 2024 and 2023.

Current wording

The following tables present the average balances and yields earned on interest earning assets and average balances and weighted average rates paid on our funding liabilities for the three and nine months ended September 30, 2024 and 2023.

Previous wording

(2)The adjustment for securities and loans taxable equivalency amounted to $67 thousand and $51 thousand for the three months ended June 30, 2024 and 2023, respectively.

Current wording

(2)The adjustment for securities and loans taxable equivalency amounted to $122 thousand and $52 thousand for the three months ended September 30, 2024 and 2023, respectively.

Previous wording

(2)The adjustment for securities and loans taxable equival ency amounted to $118 thousand and $102 thousand for the six months ended June 30, 2024 and 2023, respectively.

Current wording

(2)The adjustment for securities and loans taxable equivalency amounted to $239 thousand and $154 thousand for the

Previous wording

The provision for credit losses is based on management’s periodic assessment of the adequacy of our ACL-Loans and ACL-Unfunded Commitments which, in turn, is based on interrelated factors such as the composition of our loan portfolio and its inherent risk characteristics, the level of nonperforming loans and net charge-offs, both current and historic, local economic and credit conditions, the direction of real estate values, and regulatory guidelines. The provision for credit losses is charged against earnings in order to maintain our ACL-Loans and ACL-Unfunded Commitments and reflects management’s best estimate of probable losses inherent in our loan portfolio as of the balance sheet date.

Current wording

The provision (credit) for credit losses is based on management’s periodic assessment of the adequacy of our ACL-Loans and ACL-Unfunded Commitments which, in turn, is based on interrelated factors such as the composition of our loan portfolio and its inherent risk characteristics, the level of nonperforming loans and net charge-offs, both current and historic, local economic and credit conditions, the direction of real estate values, and regulatory guidelines. The provision (credit) for credit losses is charged against earnings in order to maintain our ACL-Loans and ACL-Unfunded Commitments and reflects management’s best estimate of probable losses inherent in our loan portfolio as of the balance sheet date.

Previous wording

The provision for credit losses for the three months ended June 30, 2024 was $8.2 million compared to a provision for credit losses of $2.6 million for the three months ended June 30, 2023. The provision for credit losses for the for the six months ended June 30, 2024 was $11.9 million compared to a provision for credit losses of $3.4 million for the six months ended June 30, 2023. The increase in the provision for credit losses for the quarter was primarily due to an additional $7.4 million in specific reserve for two loans. Of the $7.4 million:

Current wording

The provision for credit losses for the three months ended September 30, 2024 was $6.3 million compared to a credit for credit losses of $1.6 million for the three months ended September 30, 2023. The provision for credit losses for the nine months ended September 30, 2024 was $18.2 million compared to a provision for credit losses of $1.8 million for the nine months ended September 30, 2023. The increase in the provision for credit losses for the quarter was primarily due to a charge-off of $8.2 million. The increase was partially offset by a $1.0 million recovery on a previously charged-off loan.

Previous wording

The increase in provision for credit losses for the six months ended June 30, 2024 was primarily driven by aforementioned increase in specific reserves.

Current wording

The increase in provision for credit losses for the nine months ended September 30, 2024 was primarily driven due to charge-offs of $20.1 million partially offset by recoveries of $1.3 million.

Previous wording

The following tables compare noninterest income for the three and six months ended June 30, 2024 and 2023:

Current wording

The following tables compare noninterest income for the three and nine months ended September 30, 2024 and 2023:

Previous wording

Noninterest income decreased by $0.7 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. Noninterest income decreased by $1.3 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The decrease in noninterest income for the three and six months ended June 30, 2024 was driven by lower gains from loan sales.

Current wording

Noninterest expense increased by $0.7 million to $12.9 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Noninterest expense increased by $0.9 million to $38.4 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase in noninterest expense was primarily driven by an increase in professional services for the three and nine months ended September 30, 2024.

Previous wording

Income tax expense for the three months ended June 30, 2024 and 2023 totaled $0.4 million and $2.2 million, respectively. The effective tax rates for the three months ended June 30, 2024 and 2023 were 24.2% and 21.5%, respectively. Income tax expense for the six months ended June 30, 2024 and 2023 totaled $1.7 million and $5.4 million, respectively. The effective tax rates for the six months ended June 30, 2024 and 2023 were 25.5% and 22.6%, respectively.

Current wording

Income tax expense for the three months ended September 30, 2024 and 2023 totaled $0.8 million and $3.1 million, respectively. The effective tax rates for the three months ended September 30, 2024 and 2023 were 29.0% and 23.9%, respectively. Income tax expense for the nine months ended September 30, 2024 and 2023 totaled $2.5 million and $8.4 million, respectively. The effective tax rates for the nine months ended September 30, 2024 and 2023 were 26.6% and 23.1%, respectively.

Previous wording

Assets totaled $3.1 billion at June 30, 2024 a decrease of $73.8 million or 2.3% compared to December 31, 2023. Gross loans totaled $2.7 billion at June 30, 2024, a decrease of $61.4 million or 2.3% compared to December 31, 2023. Deposits totaled $2.7 billion at June 30, 2024, a decrease of $74.4 million, or 2.7% compared to December 31, 2023.

Current wording

Assets totaled $3.2 billion at September 30, 2024 a decrease of $54.4 million or 1.7% compared to December 31, 2023. Gross loans totaled $2.6 billion at September 30, 2024, a decrease of $95.4 million or 3.5% compared to December 31, 2023. Deposits totaled $2.7 billion at September 30, 2024, a decrease of $48.6 million, or 1.8% compared to December 31, 2023.

Previous wording

Shareholders’ equity totaled $267.0 million as of June 30, 2024, an increase of $1.2 million compared to December 31, 2023, primarily a result of net income of $4.9 million for the six months ended June 30, 2024. The increase was partially offset by dividends paid of $3.2 million.

Current wording

Shareholders’ equity totaled $267.9 million as of September 30, 2024, an increase of $2.2 million compared to December 31, 2023, primarily a result of net income of $6.8 million for the nine months ended September 30, 2024. The increase was partially offset by dividends paid of $4.7 million.

Previous wording

Total loans before deferred loan fees and the ACL-Loans were $2.7 billion at June 30, 2024 and $2.7 billion at December 31, 2023. Total gross loans decreased $61.4 million as of June 30, 2024 compared to the year ended December 31, 2023.

Current wording

Total loans before deferred loan fees and the ACL-Loans were $2.6 billion at September 30, 2024 and $2.7 billion at December 31, 2023. Total gross loans decreased $95.4 million as of September 30, 2024 compared to the year ended December 31, 2023.

Previous wording

(1)Excl udes the negative fair value effect of the portfolio layer swap of $779 thousand and the positive fair value effective of the portfolio layer swap of $742 thousand for Commercial Real Estate at June 30, 2024 and December 31, 2023, respectively.

Current wording

(1)Excl udes the positive fair value effect of the portfolio layer swap of $1,200 thousand and the positive fair value effect of the portfolio layer swap of $742 thousand for Commercial Real Estate at September 30, 2024 and December 31, 2023, respectively.

Previous wording

Asof June 30, 2024, the Bank had $188.6 million of loans collateralized by offices, which represented 9.9% of the total loan portfolio. Most of the properties in this portfolio are in suburban locations, with no properties located in New York City. 91.0% of this portfolio was pass rated, and there were three relationships totaling $16.9 million on nonaccrual status. As of June 30, 2024, we had $284.6 million of loans collateralized by multifamily properties, which represented 14.9% of the total loan portfolio. 100% of this portfolio is pass rated and current. These properties are all located in Connecticut, New York, or New Jersey, with nine properties, totaling $51.8 million, located in New York City. 79.0% of the New York City exposure is located in Brooklyn, 11.6% in Manhattan and the remaining 9.4% in Queens.

Current wording

Asof September 30, 2024, the Bank had $166.1 million of loans collateralized by offices, which represented 6.3% of the total loan portfolio. Most of the properties in this portfolio are in suburban locations. 96.7% of this portfolio was pass rated, and there were two relationships totaling $5.5 million on nonaccrual status. As of September 30, 2024, we had $284.6 million of loans collateralized by multifamily properties, which represented 10.9% of the total loan portfolio. These properties are all located in Connecticut, New York, Pennsylvania, or New Jersey, with nine properties, totaling $51.7 million, located in New York City. 78.9% of the New York City exposure is located in Brooklyn, 11.6% in Manhattan and the remaining 9.5% in Queens.

Previous wording

Credit risk management involves a partnership between our relationship managers and our credit approval, portfolio management, credit administration and collections teams. Disciplined underwriting, portfolio monitoring and early problem recognition are important aspects of maintaining our high credit quality standards.

Current wording

Credit risk management involves a partnership between our relationship managers and our credit approval, portfolio management, credit administration and collections departments. Disciplined underwriting, portfolio monitoring and early problem recognition are important aspects of maintaining our high credit quality standards and low levels of nonperforming assets since our inception in 2002.

Previous wording

Our Board of Directors has adopted an Allowance for Credit Losses policy designed to provide management with a methodology for determining and documenting the allowance for credit losses for each reporting period. We evaluate the adequacy of the ACL-Loans at least quarterly, and in determining our ACL-Loans, we estimate losses on specific loans, or groups of loans, where the probable loss can be identified and reasonably determined. The balance of our ACL-Loans is based on internally assigned risk classifications of loans, the Bank’s and peer banks’ historical loss experience, changes in the nature of the loan portfolio, overall portfolio quality, industry concentrations, delinquency trends, current economic factors and the estimated impact of current economic conditions on certain historical loan loss rates.

Current wording

We estimate losses on specific loans, or groups of loans, where the probable loss can be identified and reasonably determined. The balance of our ACL-Loans is based on internally assigned risk classifications of loans, the Bank’s and peer banks’ historical loss experience, changes in the nature of the loan portfolio, overall portfolio quality, industry concentrations, delinquency trends, current economic factors and the estimated impact of current economic conditions on certain historical loan loss rates.

Previous wording

Our general practice is to identify problem credits early and recognize full or partial charge-offs as promptly as practicable when it is determined that it is probable that the loan will not be repaid according to its original contractual terms, including principal and interest. Full or partial charge-offs on collateral dependent loans are recognized when the collateral is deemed to be insufficient to support the carrying value of the loan. We do not recognize a recovery when an updated appraisal indicates a subsequent increase in value of the collateral.

Current wording

Our general practice is to identify problem credits early and recognize full or partial charge-offs as promptly as practicable when it is determined that it is probable that the loan will not be repaid according to its original contractual terms, including principal and interest. Full or partial charge-offs on collateral dependent individually evaluated loans are recognized when the collateral is deemed to be insufficient to support the carrying value of the loan. We do not recognize a recovery when an updated appraisal indicates a subsequent increase in value of the collateral.

Previous wording

Our charge-off policies, which comply with standards established by our banking regulators, are consistently applied from period to period. Charge-offs are recorded on a monthly basis, as incurred. Partially charged-off loans continue to be evaluated on a monthly basis and additional charge-offs or provisions for credit losses may be recorded on the remaining loan balance based on the same criteria.

Current wording

Our charge-off policies, which comply with standards established by our banking regulators, are consistently applied from period to period. Charge-offs are recorded on a monthly basis, as incurred. Partially charged-off loans continue to be evaluated on a monthly basis and additional charge-offs may be recorded on the remaining loan balance based on the same criteria.

Previous wording

At June 30, 2024, our ACL-Loans was $36.1 million and represented 1.36% of total gross loans, compared to $27.9 million or 1.03% of total gross loans, at December 31, 2023.

Current wording

At September 30, 2024, our ACL-Loans was $27.8 million and represented 1.06% of total gross loans, compared to $27.9 million, or 1.03% of total gross loans, at December 31, 2023.

Previous wording

At June 30, 2024, the carrying value of our investment securities portfolio totaled $138.0 million and represented 4.4% of total assets, compared to $127.6 million, or 4.0% of total assets, at December 31, 2023.

Current wording

At September 30, 2024, the carrying value of our investment securities portfolio totaled $145.9 million and represented 4.6% of total assets, compared to $127.6 million, or 4.0% of total assets, at December 31, 2023.

Previous wording

The net unrealized loss position on our investment portfolio at June 30, 2024 was $6.7 million and included gross unrealized gains of $1.7 million. The net unrealized loss position on our investment portfolio at December 31, 2023 was $7.5 million and included gross unrealized gains of $0.8 million.

Current wording

The net unrealized loss position on our investment portfolio at September 30, 2024 was $2.4 million and included gross unrealized gains of $3.0 million. The net unrealized loss position on our investment portfolio at December 31, 2023 was $7.5 million and included gross unrealized gains of $0.8 million.

Previous wording

Total deposits were $2.7 billion at June 30, 2024, a decrease of $74.4 million, from the balance at December 31, 2023.

Current wording

Total deposits were $2.7 billion at September 30, 2024, a decrease of $48.6 million, from the balance at December 31, 2023.

Previous wording

Brokered certificates of depo sits totaled$755.5 million at June 30, 2024 and $860.5 million at December 31, 2023, respectively. Brokered money market accounts totaled$52.1 million at June 30, 2024 and $91.4 million at December 31, 2023, respectively. There were no certificates of deposits from national listing services, one-way buy CDARS or one-way buy ICS at June 30, 2024 or December 31, 2023. Brokered deposits are comprised of Brokered CDs, brokered money market accounts, one-way buy CDARS, and one-way buy ICS.

Current wording

Brokered certificates of deposits totaled $730.6 million at September 30, 2024 and $860.5 million at December 31, 2023. There were no certificates of deposits from national listing services at September 30, 2024 or December 31, 2023. Brokered money market accounts totaled $52.9 million at September 30, 2024 and $91.4 million at December 31, 2023.

Previous wording

As of June 30, 2024, our FDIC insured deposits were $1,940.0 million, or 73% of total deposits. Additionally, deposits totaling $89.2 million, or 3% of total deposits, are insured by standby letters of credit with the Federal Home Loan Bank of Boston.

Current wording

As of September 30, 2024, our FDIC insured deposits were $2.0 billion, or 75% of total deposits. Additionally, $116.1 million of deposits, or 4% of total deposits, are insured by standby letters of credit with the Federal Home Loan Bank of Boston.

Previous wording

At June 30, 2024 and December 31, 2023, time deposits with a denomination of $100 thousand or more, including CDARS and brokered deposits, totaled $1,161.8 million and $1,199.7 million, respectively, maturing during the periods indicated in the table below:

Current wording

At September 30, 2024 and December 31, 2023, time deposits with a denomination of $100 thousand or more, including CDARS and brokered deposits, totaled $1.2 billion and $1.2 billion, respectively, maturing during the periods indicated in the table below:

Previous wording

We utilize advances from the Federal Home Loan Bank of Boston, or FHLB, as part of our overall funding strategy and to meet short-term liquidity needs, and to a lesser degree, manage interest rate risk arising from the difference in asset and liability maturities. Total FHLB advances were $90.0 millionat both June 30, 2024 and December 31, 2023.

Current wording

We utilize advances from the Federal Home Loan Bank of Boston, or FHLB, as part of our overall funding strategy and to meet short-term liquidity needs, and to a lesser degree, manage interest rate risk arising from the difference in asset and liability maturities. Total FHLB advances were $90.0 million at September 30, 2024 and December 31, 2023, respectively.

Previous wording

The Bank has additional borrowing capacity at the FHLB up to a certain percentage of the value of qualified collateral. In accordance with agreements with the FHLB, the qualified collateral must be free and clear of liens, pledges and encumbrances. At June 30, 2024, the Bank had pledged$815.2 million of eligible loans as collateral to support borrowing capacity at the FHLB. As of June 30, 2024, the Bank had immediate availability to borrow an additional$334.7 million from the FHLB based on qualified collateral.

Current wording

The Bank has additional borrowing capacity at the FHLB up to a certain percentage of the value of qualified collateral. In accordance with agreements with the FHLB, the qualified collateral must be free and clear of liens, pledges and encumbrances. At September 30, 2024, the Bank hadpledged $762.8 million of eligible loans as collateral to support borrowing capacity at the FHLB of Boston. As of September 30, 2024, the Bank had immediate availability to borrow an additional $280.0 million based on qualified collateral.

Previous wording

Shareholders’ equity totaled $267.0 million as of June 30, 2024, an increase of $1.2 million compared to December 31, 2023, primarily a result of net income of $4.9 million for the six months ended June 30, 2024. The increase was partially offset by dividends paid of $3.2 million.

Current wording

Shareholders’ equity totaled $267.9 million as of September 30, 2024, an increase of $2.2 million compared to December 31, 2023, primarily a result of net income of $6.8 million for the nine months ended September 30, 2024. The increase was partially offset by dividends paid of $4.7 million.

Previous wording

The Bank and Company are subject to various regulatory capital requirements administered by the federal banking agencies. 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 financial statements. At June 30, 2024, the Bank met all capital adequacy requirements to which it was subject and exceeded the regulatory minimum capital levels to be considered well-capitalized under the regulatory framework for prompt corrective action. At June 30, 2024, the Bank’s ratio of Common Equity Tier 1 capital to risk-weighted assets was 11.67%, total capital to risk-weighted assets was 11.67%, Tier 1 capital to risk-weighted assets was 12.92% and Tier 1 capital to average assets was 10.17%. At June 30, 2024, the Company met all capital adequacy requirements to which it was subject and exceeded the regulatory minimum capital levels to be considered well-capitalized under the regulatory framework for prompt corrective action. At June 30, 2024, the Company’s ratio of Common Equity Tier 1 capital to risk-weighted assets was 9.56%, total capital to risk-weighted assets was 9.56%, Tier 1 capital to risk-weighted assets was 13.30% and Tier 1 capital to average assets was 8.34%.

Current wording

The Bank and Company are subject to various regulatory capital requirements administered by the federal banking agencies. 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 financial statements. At September 30, 2024, the Bank met all capital adequacy requirements to which it was subject and exceeded the regulatory minimum capital levels to be considered well-capitalized under the regulatory framework for prompt corrective action. At September 30, 2024, the Bank’s ratio of Common Equity Tier 1 capital to risk-weighted assets was 11.80%, total capital to risk-weighted assets was 12.83%, Tier 1 capital to risk-weighted assets was 11.80% and Tier 1 capital to average assets was 10.24%. At September 30, 2024, the Company met all capital adequacy requirements to which it was subject and exceeded the regulatory minimum capital levels to be considered well-capitalized under the regulatory framework for prompt corrective action. At September 30, 2024, the Company’s ratio of Common Equity Tier 1 capital to risk-weighted assets was 9.70%, total capital to risk-weighted assets was 13.26%, Tier 1 capital to risk-weighted assets was 9.70% and Tier 1 capital to average assets was 8.44%.