Bankwell Financial Group Inc

Previous wording

(d)Calculated using the principal amounts outstanding on loans.

Current wording

(c)Calculated using the principal amounts outstanding on loans.

Previous wording

(e)Nonperforming assets consist of nonperforming loans and other real estate owned.

Current wording

(d)Nonperforming assets consist of nonperforming loans and other real estate owned.

Previous wording

(f)The dividend payout ratio is the dividends per share divided by diluted earnings per share.

Current wording

(e)The dividend payout ratio is the dividends per share divided by diluted earnings per share.

Previous wording

(g)Performance ratios for the year ended December 31, 2020 were negatively impacted by incremental COVID-19 pandemic related loan loss reserves and a $3.9 million one-time charge related to office consolidation, vendor contract termination and employee severance costs recognized in the fourth quarter of 2020.

Current wording

(f)Performance ratios for the year ended December 31, 2020 were negatively impacted by incremental COVID-19 pandemic related loan loss reserves and a $3.9 million one-time charge related to office consolidation, vendor contract termination and employee severance costs recognized in the fourth quarter of 2020.

Previous wording

The ACL-Loans is measured on each loan’s amortized cost basis, excluding interest receivable, and is initially recognized upon origination or purchase of the loan, and subsequently remeasured on a recurring basis. The ACL-Loans is recognized as a contra-asset, and credit loss expense is recorded as a provision for loan losses in the consolidated statements of income. Loan losses are charged off against the ACL-Loans when management believes the loan is uncollectible. Subsequent recoveries, if any, are credited to the ACL-Loans. Loans are normally placed on nonaccrual status if it is probable that the Company will be unable to collect the full payment of principal and interest when due according to the contractual terms of the loan agreement, or the loan is past due for a period of 90 days or more unless the obligation is well-secured and is in the process of collection. The Company generally does not recognize an allowance for credit losses ("ACL") on accrued interest receivables, consistent with its policy to reverse interest income when interest is 90 days or more past due.

Current wording

The ACL-Loans is measured on each loan’s amortized cost basis, excluding interest receivable, and is initially recognized upon origination or purchase of the loan, and subsequently remeasured on a recurring basis. The ACL-Loans is recognized as a contra-asset, and credit loss expense is recorded as a provision for credit losses in the consolidated statements of income. Loan losses are charged off against the ACL-Loans when management believes the loan is uncollectible. Subsequent recoveries, if any, are credited to the ACL-Loans. Loans are normally placed on nonaccrual status if it is probable that the Company will be unable to collect the full payment of principal and interest when due according to the contractual terms of the loan agreement, or the loan is past due for a period of 90 days or more unless the obligation is well-secured and is in the process of collection. The Company generally does not recognize an allowance for credit losses ("ACL") on accrued interest receivables, consistent with its policy to reverse interest income when interest is 90 days or more past due.

Previous wording

When loans do not share risk characteristics with other financial assets they are evaluated individually. Management applies its normal loan review procedures in making these judgments. Individually evaluated loans consist of loans with credit quality indicators which are substandard or doubtful. The Company also individually evaluates all insurance premium loans. While insurance premium loans are considered consumer loans, the third-party Consumer ACL model is designed for unsecured lending, whereas these loans are secured. To account for the fully secured structure of this type of loan, management determined each loan will be individually evaluated, regardless of the credit quality indicators. These loans are evaluated based upon their collateral, which primarily consists of cash, cash surrender value life insurance, and in some cases real estate. In determining the ACL-Loans for individually evaluated loans, the Company generally applies a discounted cash flow method for instruments that are individually assessed. For collateral dependent financial assets where the Company has determined that foreclosure of the collateral is probable and where the borrower is experiencing financial difficulty, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the asset as of the measurement date. Fair value is generally calculated based on the value of the underlying collateral less an appraisal discount and the estimated cost to sell.

Current wording

When loans do not share risk characteristics with other financial assets they are evaluated individually. Management applies its normal loan review procedures in making these judgments. Individually evaluated loans consist of loans with credit quality indicators which are substandard or doubtful. The Company also individually evaluates all insurance premium loans as well as a cash-secured loan to an individual. While these loans are considered consumer loans, the third-party Consumer ACL model is designed for unsecured lending, whereas these loans are secured. To account for the fully secured structure of this type of loan, management determined each loan will be individually evaluated, regardless of the credit quality indicators. These loans are evaluated based upon their collateral, which primarily consists of cash, cash surrender value life insurance, and in some cases real estate. In determining the ACL-Loans for individually evaluated loans, the Company generally applies a discounted cash flow method for instruments that are individually assessed. For collateral dependent financial assets where the Company has determined that foreclosure of the collateral is probable and where the borrower is experiencing financial difficulty, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the asset as of the measurement date. Fair value is generally calculated based on the value of the underlying collateral less an appraisal discount and the estimated cost to sell.

Previous wording

The Company entered intoone 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 designated the fair value swap under the portfolio layer method. 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. Adjustments will be made to record the swap at fair value on the Consolidated Balance Sheets, with changes in fair value recognized in interest income. 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.

Current wording

The Company has one pay-fixed portfolio layer method fair value swap, designated as a hedging instrument, with a total notional amount of $150 million. The Company designated the fair value swap under the portfolio layer method. 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. Adjustments will be made to record the swap at fair value on the Consolidated Balance Sheets, with changes in fair value recognized in interest income. 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.

Previous wording

Effective January 1, 2023, pursuant to ASU No. 2016-13, each quarter the Company individually evaluates the available for sale debt securities and held to maturity securities for impairment credit losses. Available for sale securities include U.S. Treasuries, mortgage-backed securities, and corporate bonds. U.S. Treasuries and mortgaged-backed securities are guaranteed by the U.S. Government and as a result, management has a zero loss expectation. No ACL-Securities was recorded for these securities as of December 31, 2023. For the corporate bond portfolio, the Company developed a metric which includes each issuer’s current credit ratings and key financial performance metrics to assess the underlying performance of each issuer. The analysis of the issuers’ performance and the intent of the Company to retain these securities support the determination that there was no expected credit loss, and therefore, no ACL-Securities were recognized on the corporate bond portfolio as of December 31, 2023. Of our held to maturity securities portfolio, one security’s fair value was less than its amortized cost as of December 31, 2023. Since this is a highly rated state agency and municipal obligation, the Company's expectation of nonpayment of the amortized cost basis is zero. No allowance for ALC-Securities was recorded for this security as of December 31, 2023.

Current wording

Pursuant to ASU No. 2016-13, each quarter the Company individually evaluates the available for sale debt securities and held to maturity securities for impairment credit losses. Available for sale securities include U.S. Treasuries, mortgage-backed securities, and corporate bonds. U.S. Treasuries and mortgaged-backed securities are guaranteed by the U.S. Government and as a result, management has a zero loss expectation. No ACL-Securities was recorded for these securities as of December 31, 2024. For the corporate bond portfolio, the Company developed a metric which includes each issuer’s current credit ratings and key financial performance metrics to assess the underlying performance of each issuer. The analysis of the issuers’ performance and the intent of the Company to retain these securities support the determination that there was no expected credit loss, and therefore, no ACL-Securities were recognized on the corporate bond portfolio as of December 31, 2024. Of our held to maturity securities portfolio, one security’s fair value was less than its amortized cost as of December 31, 2024. Since this is a highly rated state agency and municipal obligation, the Company's expectation of nonpayment of the amortized cost basis is zero. No allowance for ALC-Securities was recorded for this security as of December 31, 2024.

Previous wording

Our net income for the year ended December 31, 2023 was $36.7 million, a decrease of $0.8 million, or 2.0%, compared to the year ended December 31, 2022. Diluted earnings per share was $4.67 for the year ended December 31, 2023, compared to diluted earnings per share of $4.79 for the year ended December 31, 2022. Our returns on average shareholders' equity and average assets for the year ended December 31, 2023, were 14.55% and 1.13%, respectively, compared to 16.72% and 1.44%, respectively for the year ended December 31, 2022.

Current wording

Our net income for the year ended December 31, 2024 was $9.8 million, a decrease of $26.9 million, or 73.4%, compared to the year ended December 31, 2023. Diluted earnings per share was $1.23 for the year ended December 31, 2024, compared to diluted earnings per share of $4.67 for the year ended December 31, 2023. Our returns on average shareholders' equity and average assets for the year ended December 31, 2024, were 3.60% and 0.31%, respectively, compared to 14.55% and 1.13%, respectively for the year ended December 31, 2023.

Previous wording

Revenues (net interest income plus noninterest income) for the year ended December 31, 2023 were $99.3 million, versus $97.8 million for the year ended December 31, 2022. The increase in revenues for the year ended 2023 was primarily attributable to increases in the gain on sales of loans and servicing charges and fees. The increase was partially offset by a decrease in net interest income of $0.3 million.

Current wording

Revenues (net interest income plus noninterest income) for the year ended December 31, 2024 were $87.0 million, versus $99.3 million for theyear ended December 31, 2023. The decrease in revenues for the year ended December 31, 2024 was attributable to an increase in interest expense on deposits and lower gains from loan sales, partially offset by an increase in interest and fees on loans due to higher loan yields and prepayment fees.

Previous wording

Net interest income for the year ended December 31, 2023 was $94.5 million, a decrease of $0.3 million compared to the year ended December 31, 2022. Our net interest margin decreased 80 basis points to 2.98% for the year ended December 31, 2023 compared to the year ended December 31, 2022. The decrease in the net interest margin was due to an increase in funding costs partially offset by an increase in yields on earning assets.

Current wording

Net interest income for the year ended December 31, 2024 was $83.3 million, a decrease of $11.2 million compared to the year ended December 31, 2023. Our net interest margin decreased 28 basis points to 2.70% for the year ended December 31, 2024 compared to the year ended December 31, 2023. The decrease in the net interest margin was due to an increase in funding costs partially offset by an increase in yields on earning assets.

Previous wording

FTE net interest income for the years ended December 31, 2023 and 2022 was $94.7 million and $94.9 million, respectively. FTE net interest income decreased primarily due to an increase in interest expense partially offset by an increase in interest income attributable to loan growth and higher overall loan yields.

Current wording

FTE net interest income for the years ended Dece mber 31, 2024 and 2023 was $83.7 million and $94.7 million, respectively. FTE net interest income decreased primarily due to an increase in interest expense partially offset by an increase in interest income attributable to higher loan yields.

Previous wording

FTE basis interest income for the year ended December 31, 2023 increased $70.3 million, or 59.5%, to $188.7 million compared to FTE basis interest income for the year ended December 31, 2022 due primarily to an increase in commercial real estate loans and commercial business loans. Average interest earning assets were $3.2 billion for the year ended December 31, 2023, increasing by $663.5 million, or 26.4%, from the year ended December 31, 2022. The average balance of total loans increased $599.6 million, or 27.9%. The total average balance of securities for the year ended December 31, 2023 increased by $11.2 million, or 9.4%, from the year ended December 31, 2022. The total yield in earnings assets increased to 5.86% at December 31, 2023, compared to 4.64% at December 31, 2022. The increase in yield was primarily driven by higher yields on loans, as well as higher yields on our cash balances as a result of the overall higher rate environment for 2023.

Current wording

FTE basis interest income for the year ended December 31, 2024 increased $3.7 million, or 2.0%, to $192.4 million compared to FTE basis interest income for the year ended December 31, 2023 due primarily to an increase in commercial real estate loans. Average interest earning assets were $3.1 billion for the year ended December 31, 2024, decreasing by $72.4 million, or 2.3%, from the year ended December 31, 2023. The average balance of total loans decreased $79.2 million, or 2.9%. The total average balance of securities for the year ended December 31, 2024 increased by $13.0 million, or 10.0, from the year ended December 31, 2023. The total yield in earnings assets increased to 6.09% at December 31, 2024, compared to 5.86% at December 31, 2023. The increase in earning asset yield was primarily driven by higher yields on loans, as well as higher yields on our cash and securities balances as a result of the overall higher interest rate environment in 2024.

Previous wording

Interest expense for the year ended December 31, 2023 increased by $70.8 million, or 305.1%, compared to interest expense for the year ended December 31, 2022 due to an interest expense on deposits, resulting from an increase in rates paid on interest bearing deposits.

Current wording

Interest expense for the year ended December 31, 2024 increased by $14.7 million, or 15.7%, compared to interest expense for the year ended December 31, 2023 due to an interest expense on deposits, resulting from an increase in rates paid on interest bearing deposits.

Previous wording

(2)The adjustment for securities and loans taxable equivalency was $207 thousand and $201 thousand, respectively, for the years ended December 31, 2023 and 2022. Tax exempt income was converted to a fully taxable equivalent basis at a 20 percent tax rate for 2023 and 2022.

Current wording

(2)The adjustment for securities and loans taxable equivalency was$383 thousand and $207 thousand, respectively, for the years ended December 31, 2024 and 2023. Tax exempt income was converted to a fully taxable equivalent basis at a 20 percent tax rate for 2024 and 2023.

Previous wording

The provision for loan losses is based on management’s periodic assessment of the adequacy of our ACL-Loans which, in turn, is based on such interrelated factors 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 loan losses is charged against earnings in order to maintain our ACL-Loans and reflects management’s best estimate of probable losses inherent in our loan portfolio at the balance sheet date.

Current wording

The provision for credit losses is based on management’s periodic assessment of the adequacy of our ACL-Loans which, in turn, is based on such interrelated factors 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 reflects management’s best estimate of probable losses inherent in our loan portfolio at the balance sheet date.

Previous wording

The provision for loan losses for the year ended December 31, 2023 was $0.9 million compared to a $5.4 million provision for loan losses for the year ended December 31, 2022.

Current wording

The provision for credit losses for the year ended December 31, 2024 was $22.6 million compared to a $0.9 million provision for credit losses for the year ended December 31, 2023. The increase in the provision for credit losses during the year was primarily due to net charge offs.

Previous wording

Noninterest income increased by $1.8 million to $4.8 million for the year ended December 31, 2023, compared to the year ended December 31, 2022. The increase for the year ended December 31, 2023 was mainly driven by an increase in gains on SBA loan sales and service charges and fees.

Current wording

Noninterest income decreased by $1.1 million to $3.7 million for the year ended December 31, 2024, compared to the year ended December 31, 2023. The decrease for the year ended December 31, 2024 was mainly driven by a decrease in gains on SBA loan sales partially offset by an increase in service charges and fees.

Previous wording

Noninterest expense increased by $6.0 million, or 14%, to $50.4 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase in noninterest expense was primarily driven by an increase in FDIC insurance expense and salaries and employee benefits expense.

Current wording

Noninterest expense increased by $0.7 million, or 1.3%, to $51.1 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. The increase in noninterest expense was primarily driven by increases in professional services and occupancy and equipment costs, partially offset by decreases in salaries and employee benefits and FDIC insurance expense due to reduced brokered deposit balances.

Previous wording

Income tax expense for the years ended December 31, 2023 and 2022 totaled $11.4 million and $10.6 million, respectively. The effective tax rates for the years ended December 31, 2023 and 2022, were 23.7% and 22.0%, respectively.

Current wording

Income tax expense for the years ended December 31, 2024 and 2023 totaled $3.6 million and $11.4 million, respectively. The effective tax rates for the years ended December 31, 2024 and 2023, were 26.7% and 23.7%, respectively.

Previous wording

Our net deferred tax asset at December 31, 2023 was $9.4 million, compared to $7.4 million at December 31, 2022.

Current wording

Our net deferred tax asset at December 31, 2024 was $9.7 million, compared to $9.4 million at December 31, 2023.

Previous wording

Assets totaled $3.2 billion at December 31, 2023, compared to assets of $3.3 billion at December 31, 2022. The increase in assets was primarily due to loan growth. Gross loans totaled $2.7 billion at December 31, 2023, an increase of $43.2 million or 1.6% compared to December 31, 2022. Deposits totaled $2.7 billion at December 31, 2023, compared to deposits of $2.8 billion at December 31, 2022.

Current wording

Assets totaled $3.3 billion at December 31, 2024, compared to assets of $3.2 billion at December 31, 2023. Gross loans totaled $2.7 billion at December 31, 2024, compared to gross loans of $2.7 billion at December 31, 2023. Deposits totaled $2.8 billion at December 31, 2024, compared to deposits of $2.7 billion at December 31, 2023.

Previous wording

Residential real estate. Residential real estate loans decreased by $9.7 million, or 15.9%, at December 31,2023 compared to December 31, 2022 and amounted to $50.9 million, representing 2% of total loans at December 31,2023. In the fourth quarter of 2017, management made the strategic decision to cease originating residential mortgage loans.

Current wording

Residential real estate. Residential real estate loans decreased by $8.2 million, or 16.0%, at December 31, 2024 compared to December 31, 2023 and amounted to $42.8 million, representing 2% of total loans at December 31, 2024. The Bank ceased originating residential mortgage loans in 2017.

Previous wording

Commercial real estate. Commercial real estate loans were $1.9 billion and represented 72% of our total loan portfolio at December 31,2023, a net increase of $26.4 million, or 1.4%, from December 31, 2022. Commercial real estate loans are secured by a variety of property types, including healthcare facilities, office buildings, retail facilities, commercial mixed use and multi-family dwellings.

Current wording

Commercial real estate. Commercial real estate loans were $1.9 billion and represented 70% of our total loan portfolio at December 31, 2024, a net decrease of $48.5 million, or 2.5%, from December 31, 2023. Commercial real estate loans are secured by a variety of property types, including healthcare facilities, office buildings, retail facilities, commercial mixed use and multi-family dwellings.

Previous wording

Construction. Construction loans were $183.4 million at December 312023, an increase of $28.2 million, or 18.2%, from December 31, 2022. Commercial construction loans consist of commercial development projects, such as apartment buildings and condominiums, as well as office buildings, retail and other income producing properties and land loans.

Current wording

Construction. Construction loans were $173.6 million at December 31 2024, a decrease of $9.9 million, or 5.4%, from December 31, 2023. Commercial construction loans consist of commercial development projects, such as apartment buildings and condominiums, as well as office buildings, retail and other income producing properties and land loans.

Previous wording

Commercial business. Commercial business loans were $500.6 million and represented 18.4% of our total loan portfolio at December 31,2023, a net decrease of $19.9 million, or 3.8%, from December 31, 2022. Commercial business loans primarily provide working capital, equipment financing, financing for leasehold improvements and financing for expansion and are generally secured by assignments of corporate assets, real estate and personal guarantees of the business owners.

Current wording

Commercial business. Commercial business loans were $515.1 million and represented 19.0% of our total loan portfolio at December 31, 2024, a net increase of $14.6 million, or 2.9%, from December 31, 2023. Commercial business loans primarily provide working capital, equipment financing, financing for leasehold improvements and financing for expansion and are generally secured by assignments of corporate assets, real estate and personal guarantees of the business owners.

Previous wording

Consumer loans. Consumer loans were $36.0 million and represented 1.3% of our total loan portfolio as of December 31, 2023, an increase of $18.1 million, or 100.7%. We do not expect our consumer loans to become a material component ofour loan portfolio, as we do not engage in any material amount of consumer lending. This portfolio segment includes loans to finance insurance premiums secured by the cash surrender value of life insurance and marketable securities, overdraft lines of credit, and unsecured personal loans to high net worth individuals.

Current wording

Consumer loans. Consumer loans were $75.3 million and represented 2.8% of our total loan portfolio as of December 31, 2024, an increase of $39.3 million, or 108.9%. We do not expect our consumer loans to become a material component of our loan portfolio, as we do not engage in any material amount of consumer lending. This portfolio segment includes loans to finance insurance premiums secured by the cash surrender value of life insurance and marketable securities, overdraft lines of credit, and personal loans to high net worth individuals.

Previous wording

We evaluate the appropriateness of our underwriting standards in response to changes in national and regional economic conditions, including such matters as market interest rates, energy prices, trends in real estate values, and employment levels. Based on our assessment of these matters, underwriting standards and credit monitoring activities are enhanced from time to time in response to changes in these conditions. In responseto the economic environment in 2023, the Company:

Current wording

We evaluate the appropriateness of our underwriting standards in response to changes in national and regional economic conditions, including such matters as market interest rates, energy prices, trends in real estate values, and employment levels. Based on our assessment of these matters, underwriting standards and credit monitoring activities are enhanced from time to time in response to changes in these conditions. In responseto the recent economic environment, the Company adopted expanded monitoring and reporting on our loan portfolio, including:

Previous wording

•increased and expanded its monitoring of our entire loan portfolio, with added focus on our commercial real estate loan portfolio,

Current wording

•increased and expanded our monitoring of our entire loan portfolio, with added focus on our commercial real estate loan portfolio,

Previous wording

◦upcoming commercial real estate maturity schedule, including loan to value, debt service coverage ratio, occupancy, and commentary on expected refinance or payoff status, maturity by property type and owner occupied or non-owner-occupied status;

Current wording

◦upcoming commercial real estate maturity schedule, including loan to value, debt service coverage ratio, occupancy, and commentary on expected refinance or payoff status, maturity by property type and owner occupied or non-owner-occupied status; and

Previous wording

The following table compares the composition of our commercial real estate loan portfolio by property type, and collateral location as of December 31,2023:

Current wording

The following table compares the composition of our commercial real estate loan portfolio by property type, and collateral location as of December 31,2024:

Previous wording

During 2023, we conducted a detailed review of every general office loan in our portfolio. As of December 31,2023, the Bank had$193.0 million of loans collateralized by offices, which represented 7.1% of the total loan portfolio. Most of the properties in this portfolio are in suburban locations, including all the New York State properties, which are all located in Westchester County. 96.9% of this portfolio was pass rated, and there were two relationships totaling $6.0 million on nonaccrual status. We also performed an additional review of our multifamily exposure. As of December 31, 2023, we had $257.5 million of loans collateralized by multifamily properties, which represented 9.5% of the total loan portfolio. 100% of the portfolio is pass rated. These properties are all located in Connecticut, New York, or New Jersey, with the majority in suburban locations. Nine properties totaling $52.3 million, with an average balance of $5.8 million, are in New York City.

Current wording

During 2024, we conducted a detailed review of every general office loan in our portfolio. As of December 31,2024, the Bank had $160.4 million of loans collateralized by offices, which represented 5.9% of the total loan portfolio. Most of the properties in this portfolio are in suburban locations. 96.6% of this portfolio was pass rated, and there were two relationships totaling $5.5 million on nonaccrual status. We also performed an additional review of our multifamily exposure. As of December 31, 2024, we had$283.6 million of loans collateralized by multifamily properties, which represented 10.5% of the total loan portfolio. 89.0% of the portfolio is pass rated, and there was one relationship totaling $27.1 million on nonaccrual status. These properties are all located in Connecticut, New York, New Jersey, or Pennsylvania, with the majority in suburban locations. Nine properties totaling $51.6 million, with an average balance of $5.7 million, are in New York City.

Previous wording

(1) Excludes the positive fair value effect of the portfolio layer swap of $742 thousand for Commercial Real Estate and $179 thousand for Commercial Business.

Current wording

(1) Excludes the positive fair value effect of the portfolio layer swap of $219 thousand for Commercial Real Estate and $39 thousand for Commercial Business.

Previous wording

We actively manage asset quality through our underwriting practices and collection operations. Our Board of Directors monitors credit risk management. The Directors' Loan Committee ("DLC") has primary oversight responsibility for the credit-granting function including approval authority for credit-granting policies, review of management’s credit-granting activities and approval of large exposure credit requests, as well as loan review and problem loan management and resolution. The committee reports the results of its respective oversight functions to our Board of Directors. In addition, our Board of Directors receives information concerning asset quality measurements and trends on a monthly basis. While we continue to adhere to prudent underwriting standards, our loan portfolio is not immune to potential negative consequences as a result of general economic weakness, such as a prolonged downturn in the real estate market on a national scale. Decreases in real estate values could adversely affect the value of property used as collateral for loans. In addition, adverse changes in the economy could have a negative effect on the ability of borrowers to make scheduled loan payments, which would likely have an adverse impact on earnings.

Current wording

We actively manage asset quality through our underwriting practices and collection operations. Our Board of Directors monitors credit risk management. The Directors' Loan Committee ("DLC") has primary oversight responsibility for the credit-granting function including approval authority for credit-granting policies, review of management’s credit-granting activities and approval of large exposure credit requests, as well as loan review and problem loan management and resolution. The committee reports the results of its respective oversight functions to our Board of Directors. In addition, our Board of Directors receives information concerning asset quality measurements and trends on a monthly basis. While we continue to adhere to prudent underwriting standards, our loan portfolio is not immune to potential negative consequences as a result of general economic weakness, such as a prolonged downturn in the real estate market on a regional or national scale, or extreme climate events. Decreases in real estate values could adversely affect the value of property used as collateral for loans. In addition, adverse changes in the economy or in a borrower's business could have a negative effect on the ability of borrowers to make scheduled loan payments, which would likely have an adverse impact on earnings.

Previous wording

Credit risk management involves a partnership between our relationship managers and our credit approval, portfolio management, credit administration and collections staff. 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.

Current wording

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

Previous wording

Under the accounting model for acquired loans, the excess of cash flows expected to be collected over the carrying amount of the loans, referred to as the “accretable yield”, is accreted into interest income over the life of the loans. Accordingly, acquired loans are not subject to classification as nonaccrual in the same manner as originated loans. Rather, acquired loans are considered to be accruing loans because their interest income relates to the accretable yield recognized and not to contractual interest payments. The excess of the loans' contractually required payments over the cash flows expected to be collected is the nonaccretable difference. As such, charge-offs on acquired loans are first applied to the nonaccretable difference and then to any ACL-Loans recognized subsequent to the acquisition. A decrease in expected cash flows in subsequent periods may indicate that the loan pool is a credit loss, which would require the establishment of an ACL-Loans by a charge to the provision for loan losses.

Current wording

Under the accounting model for acquired loans, the excess of cash flows expected to be collected over the carrying amount of the loans, referred to as the “accretable yield”, is accreted into interest income over the life of the loans. Accordingly, acquired loans are not subject to classification as nonaccrual in the same manner as originated loans. Rather, acquired loans are considered to be accruing loans because their interest income relates to the accretable yield recognized and not to contractual interest payments. The excess of the loans' contractually required payments over the cash flows expected to be collected is the nonaccretable difference. As such, charge-offs on acquired loans are first applied to the nonaccretable difference and then to any ACL-Loans recognized subsequent to the acquisition. A decrease in expected cash flows in subsequent periods may indicate that the loan pool is a credit loss, which would require the establishment of an ACL-Loans by a charge to the provision for credit losses.

Previous wording

Total nonaccrual loans were $49.2 million as of December 31,2023. Nonperforming assets as a percentage of total assets was 1.53% at December 31,2023, when compared to 0.51% at December 31, 2022. The ACL-Loans at December 31, 2023 was $27.9 million, representing 1.03% of total loans.

Current wording

Total nonaccrual loans were $53.3 million as of December 31, 2024. Nonperforming assets as a percentage of total assets was 1.88% at December 31, 2024, when compared to 1.53% at December 31, 2023. The ACL-Loans at December 31, 2024 was $29.0 million, representing 1.07% of total loans.

Previous wording

Total past due loans totaled $21.3 million and represented 0.78% of total loans as of December 31, 2023, increasing $5.2 million from December 31, 2022.

Current wording

Totalpast due loans totaled $44.1 million and represented 1.63% of total loans as of December 31, 2024, increasing $22.8 million from December 31, 2023.

Previous wording

Restructured loans are classified as accruing or nonaccruing based on management’s assessment of the collectability of the loan. Loans which are already on nonaccrual status at the time of the restructuring generally remain on nonaccrual status for approximately six months before management considers such loans for return to accruing status. Accruing restructured loans are placed into nonaccrual status if and when the borrower fails to comply with the restructured terms and management deems it unlikely that the borrower will return to a status of compliance in the near term. There were no nonaccrual loans modified during the year ended December 31, 2023. There were seven nonaccrual loans modified totaling $2.5 million during the year ended December 31, 2022.

Current wording

Restructured loans are classified as accruing or nonaccruing based on management’s assessment of the collectability of the loan. Loans which are already on nonaccrual status at the time of the restructuring generally remain on nonaccrual status for approximately six months before management considers such loans for return to accruing status. Accruing restructured loans are placed into nonaccrual status if and when the borrower fails to comply with the restructured terms and management deems it unlikely that the borrower will return to a status of compliance in the near term. There were no nonaccrual loans modified during the years ended December 31, 2024 and 2023.

Previous wording

As of December 31, 2023 and 2022, loans classified as modified totaled$16.4 million and $22.2 million, respectively.

Current wording

As of December 31, 2024 and 2023, loans classified as modified totaled $12.2 million and $16.4 million, respectively.