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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________to________

Commission File Number: 001-36448

Bankwell Financial Group, Inc.

(Exact Name of Registrant as specified in its Charter)


Connecticut						20-8251355
(State or other jurisdiction of						(I.R.S. Employer
Incorporation or organization)						Identification No.)

258 Elm Street

New Canaan, Connecticut 06840

(203) 652-0166

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, no par value per share	BWFG	NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þ Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	¨	Accelerated filer	☑
Non-accelerated filer	¨	Smaller reporting company	☑
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes þ No

As of July 31, 2025, there were 7,877,443 shares of the registrant’s common stock outstanding.

Bankwell Financial Group, Inc.

Form 10-Q

Table of Contents


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)			4
Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024			4
Consolidated Statements of Income for the three and six months ended June 30, 2025 and 2024			5
Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2025 and 2024			6
Consolidated Statements of Shareholders’ Equity for the three and six months ended June 30, 2025 and 2024			6
Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024			9
Notes to Consolidated Financial Statements			11

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			51

Item 3. Quantitative and Qualitative Disclosures About Market Risk			67

Item 4. Controls and Procedures			67

PART II – OTHER INFORMATION

Item 1. Legal Proceedings			68

Item 1A. Risk Factors			68

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			68

Item 3. Defaults Upon Senior Securities			69

Item 4. Mine Safety Disclosures			69

Item 5. Other Information			69

Item 6. Exhibits			69

Signatures			69

Certifications

PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements

Bankwell Financial Group, Inc.

Consolidated Balance Sheets - (unaudited)

(In thousands, except share data)


	June 30, 2025		December 31, 2024
ASSETS
Cash and due from banks	$	313,998	$	293,552
Federal funds sold	8,466		13,972
Cash and cash equivalents	322,464		307,524

Investment securities
Marketable equity securities, at fair value	2,188		2,118
Available for sale investment securities, at fair value	103,930		107,428
Held to maturity investment securities, at amortized cost (fair values of $37,764 and $36,691 at June 30, 2025 and December 31, 2024, respectively)	36,434		36,553
Total investment securities	142,552		146,099

Loans receivable (net of ACL-Loans of $29,256 at June 30, 2025 and $29,007 at December 31, 2024, respectively)	2,635,742		2,672,959
Other real estate owned	1,284		8,299
Accrued interest receivable	14,741		14,535
Federal Home Loan Bank stock, at cost	5,051		5,655
Premises and equipment, net	23,020		23,856
Bank-owned life insurance	53,488		52,791
Goodwill	2,589		2,589

Deferred income taxes, net	9,684		9,742
Other assets	25,978		24,427
Total assets	$	3,236,593	$	3,268,476
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Noninterest bearing deposits	$	397,195	$	321,875
Interest bearing deposits	2,362,086		2,465,695
Total deposits	2,759,281		2,787,570

Advances from the Federal Home Loan Bank	75,000		90,000
Subordinated debentures (face value of $70,000 and $70,000 at June 30, 2025 and December 31, 2024, respectively, less unamortized debt issuance costs of $426 and $549 at June 30, 2025 and December 31, 2024, respectively)	69,574		69,451
Accrued expenses and other liabilities	49,448		50,935
Total liabilities	2,953,303		2,997,956
Commitments and contingencies
Shareholders' equity
Common stock, no par value; 10,000,000 shares authorized, 7,873,387 and 7,859,873 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively	118,698		119,108
Retained earnings	165,495		152,656
Accumulated other comprehensive loss	(903)		(1,244)
Total shareholders' equity	283,290		270,520

Total liabilities and shareholders' equity	$	3,236,593	$	3,268,476

See accompanying notes to consolidated financial statements (unaudited)

Bankwell Financial Group, Inc.

Consolidated Statements of Income – (unaudited)

(In thousands, except share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Interest and dividend income
Interest and fees on loans	$	44,128	$	43,060	$	87,603	$	86,385
Interest and dividends on securities	1,478		1,190		2,923		2,320
Interest on cash and cash equivalents	3,043		3,429		6,600		7,255
Total interest and dividend income	48,649		47,679		97,126		95,960

Interest expense
Interest expense on deposits	23,083		24,677		47,855		50,039
Interest expense on borrowings	1,630		1,783		3,269		3,555
Total interest expense	24,713		26,460		51,124		53,594

Net interest income	23,936		21,219		46,002		42,366

(Credit) provision for credit losses	(411)		8,183		52		11,866

Net interest income after (credit) provision for credit losses	24,347		13,036		45,950		30,500

Noninterest income
Bank-owned life insurance	352		333		696		662
Service charges and fees	674		495		1,276		799
Gains and fees from sales of loans	1,080		45		1,522		366


Other	(94)		(190)		23		(229)
Total noninterest income	2,012		683		3,517		1,598

Noninterest expense
Salaries and employee benefits	7,521		6,176		14,573		12,467
Occupancy and equipment	2,505		2,238		5,080		4,561
Professional services	1,632		989		3,161		2,054
Data processing	712		755		1,597		1,495
Director fees	333		306		681		1,206
FDIC insurance	684		705		1,463		1,635
Marketing	218		90		360		203
Other	941		986		1,772		1,921
Total noninterest expense	14,546		12,245		28,687		25,542
Income before income tax expense	11,813		1,474		20,780		6,556
Income tax expense	2,725		356		4,804		1,675
Net income	$	9,088	$	1,118	$	15,976	$	4,881

Earnings Per Common Share:
Basic	$	1.16	$	0.14	$	2.04	$	0.62
Diluted	$	1.15	$	0.14	$	2.03	$	0.62

Weighted Average Common Shares Outstanding:
Basic	7,777,469		7,747,675		7,724,143		7,705,598
Diluted	7,819,828		7,723,888		7,795,820		7,721,880
Dividends per common share	$	0.20	$	0.20	$	0.40	$	0.40

See accompanying notes to consolidated financial statements (unaudited)

Bankwell Financial Group, Inc.

Consolidated Statements of Comprehensive Income (Loss) – (unaudited)

(In thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Net income	$	9,088	$	1,118	$	15,976	$	4,881
Other comprehensive income:
Unrealized gains on securities:
Unrealized holding gains on available for sale securities	660		398		1,857		182
Reclassification adjustment for gains realized in net income	—		—		—		—
Net change in unrealized gains	660		398		1,857		182
Income tax (expense) benefit	(156)		(94)		(437)		7
Unrealized gains on securities, net of tax	504		304		1,420		189
Unrealized (losses) on interest rate swaps:
Unrealized (losses) on interest rate swaps	(277)		(709)		(1,411)		(583)
Income tax benefit	66		168		332		102
Unrealized (losses) on interest rate swaps, net of tax	(211)		(541)		(1,079)		(481)
Total other comprehensive income (loss), net of tax	293		(237)		341		(292)
Comprehensive income	$	9,381	$	881	$	16,317	$	4,589

See accompanying notes to consolidated financial statements (unaudited)

Bankwell Financial Group, Inc.

Consolidated Statements of Shareholders' Equity - (unaudited)

(In thousands, except share data)


	Number of Outstanding Shares	Common Stock		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Total
Balance at March 31, 2025	7,888,013	$	118,439	$	157,971	$	(1,196)	$	275,214
Net income	—	—		9,088		—		9,088
Other comprehensive income, net of tax	—	—		—		293		293
Cash dividends declared ($0.20 per share)	—	—		(1,564)		—		(1,564)
Stock-based compensation expense	—	681		—		—		681
Forfeitures of restricted stock	—	—		—		—		—
Issuance of restricted stock	—	—		—		—		—
Stock options exercised	—	—		—		—		—
Repurchase of common stock	(14,626)	(422)		—		—		(422)
Balance at June 30, 2025	7,873,387	$	118,698	$	165,495	$	(903)	$	283,290


	Number of Outstanding Shares	Common Stock		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Total
Balance at March 31, 2024	7,908,180	$	118,401	$	151,350	$	(1,719)	$	268,032
Net income	—	—		1,118		—		1,118
Other comprehensive (loss), net of tax	—	—		—		(237)		(237)
Cash dividends declared ($0.20 per share)	—	—		(1,573)		—		(1,573)
Stock-based compensation expense	—	622		—		—		622
Forfeitures of restricted stock	(2,600)	—		—		—		—
Issuance of restricted stock	1,059	—		—		—		—
Stock options exercised	—	—		—		—		—
Repurchase of common stock	(40,140)	(986)		—		—		(986)
Balance at June 30, 2024	7,866,499	$	118,037	$	150,895	$	(1,956)	$	266,976

See accompanying notes to consolidated financial statements (unaudited)

Bankwell Financial Group, Inc.

Consolidated Statements of Shareholders' Equity - (unaudited)

(In thousands, except share data)


	Number of Outstanding Shares	Common Stock		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Total
Balance at December 31, 2024	7,859,873	$	119,108	$	152,656	$	(1,244)	$	270,520
Net income	—	—		15,976		—		15,976
Other comprehensive income, net of tax	—	—		—		341		341
Cash dividends declared ($0.40 per share)	—	—		(3,137)		—		(3,137)
Stock-based compensation expense	—	924		—		—		924
Forfeitures of restricted stock	(14,710)	—		—		—		—
Issuance of restricted stock	72,774	—		—		—		—
Stock options exercised	—	—		—		—		—
Repurchase of common stock	(44,550)	(1,334)		—		—		(1,334)
Balance at June 30, 2025	7,873,387	$	118,698	$	165,495	$	(903)	$	283,290


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


Balance at December 31, 2023	7,882,616	$	118,247	$	149,169	$	(1,664)	$	265,752
Net income	—	—		4,881		—		4,881
Other comprehensive (loss), net of tax	—	—		—		(292)		(292)
Cash dividends declared ($0.40 per share)	—	—		(3,155)		—		(3,155)
Stock-based compensation expense	—	1,696		—		—		1,696
Forfeitures of restricted stock	(2,700)	—		—		—		—
Issuance of restricted stock	62,903	—		—		—		—
Stock options exercised	—	—		—		—		—
Repurchase of common stock	(76,320)	(1,906)		—		—		(1,906)
Balance at June 30, 2024	7,866,499	$	118,037	$	150,895	$	(1,956)	$	266,976

See accompanying notes to consolidated financial statements (unaudited)

Bankwell Financial Group, Inc.

Consolidated Statements of Cash Flows – (unaudited)

(In thousands)


	Six Months Ended June 30,
	2025		2024
Cash flows from operating activities
Net income	$	15,976	$	4,881
Adjustments to reconcile net income to net cash provided by operating activities:
Net amortization of premiums and discounts on investment securities	67		87
Provision for credit losses	52		11,866
Credit for deferred income taxes	(48)		(1,853)

Change in fair value of marketable equity securities	(36)		21
Depreciation and amortization	1,977		1,871
Amortization of debt issuance costs	123		123

Increase in cash surrender value of bank-owned life insurance	(696)		(662)


Gains and fees from sales of loans	(1,522)		(366)
Stock-based compensation	924		1,696

Loss on sale of other real estate owned, net	103		—
Change in other real estate owned	(1,284)		—
Net change in:
Deferred loan fees	63		(948)
Accrued interest receivable	(206)		188
Other assets	(3,997)		(66)
Accrued expenses and other liabilities	(1,100)		(660)
Net cash provided by operating activities	10,396		16,178

Cash flows from investing activities
Proceeds from principal repayments on available for sale securities	2,293		2,288
Proceeds from principal repayments on held to maturity securities	119		81
Net proceeds from sales and calls of available for sale securities	13,000		—

Purchases of marketable equity securities	(34)		(30)
Purchases of available for sale securities	(10,006)		—
Purchases of held to maturity securities	—		(12,642)

Net decrease in loans	24,671		52,722

Proceeds from sales of loans	13,938		3,480
Purchases of premises and equipment, net	(475)		(452)
Reduction of Federal Home Loan Bank stock	603		41
Proceeds from the sale of other real estate owned	8,195		—
Net cash provided by investing activities	52,304		45,488

See accompanying notes to consolidated financial statements (unaudited)

Bankwell Financial Group, Inc.

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

(In thousands)


	Six Months Ended June 30,
	2025		2024
Cash flows from financing activities
Net change in time certificates of deposit	$	(94,637)	$	(20,754)
Net change in other deposits	66,348		(53,628)
Net change in FHLB advances	(15,000)		—




Dividends paid on common stock	(3,137)		(3,155)
Repurchase of common stock	(1,334)		(1,906)
Net cash used in financing activities	(47,760)		(79,443)
Net increase (decrease) in cash and cash equivalents	14,940		(17,777)
Cash and cash equivalents:
Beginning of year	307,524		269,157
End of period	$	322,464	$	251,380
Supplemental disclosures of cash flows information:
Cash paid for:
Interest	$	51,126	$	54,003
Income taxes	3,080		3,574
Noncash investing and financing activities:

Net change in unrealized gains or losses on available for sale securities	1,857		182
Net change in unrealized gains or losses on interest rate swaps	(1,411)		(583)

Transfer of loans from held-for-investment to held-for-sale	12,416		3,115

See accompanying notes to consolidated financial statements (unaudited)

1. Nature of Operations and Summary of Significant Accounting Policies

Bankwell Financial Group, Inc. (the "Parent Corporation") is a bank holding company headquartered in New Canaan, Connecticut. The Parent Corporation offers a broad range of financial services through its banking subsidiary, Bankwell Bank (the "Bank" and, collectively with the Parent Corporation and the Parent Corporation's subsidiaries, "we", "our", "us", or the "Company").

The Bank is a Connecticut state chartered commercial bank, founded in 2002, whose deposits are insured under the Deposit Insurance Fund administered by the Federal Deposit Insurance Corporation (“FDIC”). 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 business relationships. The Bank operates branches in New Canaan, Stamford, Fairfield, Westport, Darien, Norwalk, and Hamden, Connecticut.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and the Bank, including its wholly owned passive investment company subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“GAAP”) and general practices within the banking industry. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities as of the date of the consolidated balance sheet and revenue and expenses for the period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near-term relate to the Allowance for Credit Losses-Loans ("ACL-Loans"), derivative instrument valuation, investment securities valuation, Allowance for Credit Losses-Securities, and deferred income taxes valuation.

Segments

The Company has one reportable segment. All of the Company’s activities are interrelated, and each activity is dependent and assessed based on how each of the activities of the Company supports the others. For example, lending is dependent upon the ability of the Company to fund itself with deposits and borrowings while managing the interest rate and credit risk. Accordingly, all significant operating decisions are based upon analysis of the Company as one segment or unit.

The Chief Executive Officer (CEO), acting as the Chief Operating Decision Maker (CODM), determines the Company's one reportable segment. This determination is based on information about the Company's banking operations, its primary business, and the level of detail provided to the CODM for performance review. Similar operating performance, products and services, and customer bases allow for aggregation of business components into this one segment. The CODM evaluates financial performance by reviewing the consolidated financial results of the Company, analyzing factors such as revenue streams, significant expenses, and capital levels, as well as budget-to-actual results. Consolidated net income and related performance metrics are also used to benchmark the Company’s performance against competitors. The analysis of the Company’s results, including benchmarking, informs performance assessment and compensation decisions. The banking operations generate revenue through loans, investments, and deposits, while significant expenses include interest expense, the provision for credit losses, and salaries and employee benefits. All operations are domestic.

Basis of Consolidated Financial Statement Presentation

The unaudited consolidated financial statements presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and Rule 10-01 of Regulation S-X and do not include all of the information and note disclosures required by GAAP. In the opinion of management, all adjustments (consisting of normal recurring adjustments) and disclosures considered necessary for the fair presentation of the accompanying unaudited interim consolidated financial statements have been included. Interim results are not necessarily reflective of the results that may be expected for the year ending December 31, 2025. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included on Form 10-K for the year ended December 31, 2024.

Significant Concentrations of Credit Risk

Many of the Company's activities are with clients located in Connecticut and New York, with the majority of the Company's commercial real estate investor loans in Connecticut and some New York metro area counties. Declines in property values in these areas could significantly impact the Company. The Company has a significant concentration in commercial real estate loans, with a growing percentage being owner-occupied, which present a lower risk profile.

ACL-Loans and Allowance for Credit Losses-Unfunded Commitments ("ACL-Unfunded Commitments")

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.

The Company also records an ACL-Unfunded commitments, which is based on the same assumptions as funded loans and also considers the probability of funding. The ACL is recognized as a liability, and credit loss expense is recorded as a provision for unfunded loan commitments within the provision for credit losses in the Consolidated statements of income.

For collectively evaluated loans and related unfunded commitments, the Company utilizes software provided by a third party, which includes various models for forecasting expected credit losses, to calculate its ACL. Management selected lifetime loss rate models, utilizing CRE, C&I, and Consumer specific models, to calculate the expected losses over the life of each loan based on exposure at default, loan attributes and reasonable, supportable economic forecasts. The models selected by the Company in its ACL calculation rely upon historical losses from a broad cross section of U.S. banks that also utilize the same third party for ACL calculations. Management reviewed the third party’s analysis of the banks included in the models as part of their model development dataset and determined the Company’s loan portfolio composition by property type, balance distribution by loan age, and delinquency status are similar, which supports the use of these loss rate models. The Company also noted the third party’s model development dataset has loan concentrations that are evenly distributed across the United States, while the Company’s portfolio is mainly concentrated in the Northeast. Based on the disparate regional concentration, management determined that a select group of peer banks is necessary to scale the loss rate models to produce an ACL that is more representative of the Company’s loan portfolio. This peer-based calibration, called a "peer scalar", utilizes the loss rates of a subset of peer banks to appropriately scale the initial model results. These peers have been selected by the Company given their similar characteristics, such as loan portfolio composition and location, to better align the models’ results to the Company’s expected losses.

Key assumptions used in the models include portfolio segmentation, risk rating, forecasted economic scenarios, the peer scalar, and the expected utilization of unfunded commitments, among others. Our loan portfolios are segmented by loan level attributes such as loan type, size, date of origination, and delinquency status to create homogenous loan pools. Pool level metrics are calculated, and loss rates are subsequently applied to the pools as the loans have similar characteristics.

To account for economic uncertainty, the Company incorporates multiple economic scenarios in determining the ACL. The scenarios include various projections based on variables such as Gross Domestic Product, interest rates, property price indices, and employment measures, among others. The scenarios are probability-weighted based on available information at the time the calculation is conducted. As part of our ongoing governance of ACL, scenario weightings and model parameters are reviewed periodically by management and are subject to change, as deemed appropriate.

The Company also considers qualitative adjustments to expected credit loss estimates for information not already captured in the quantitative loss estimation models. Qualitative factor adjustments may increase or decrease management’s estimate of expected credit losses. Qualitative loss factors are based on the Company’s judgment of market, changes in loan composition or concentrations, performance trends, regulatory changes, uncertainty of macroeconomic forecasts, and other asset specific risk characteristics.

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 of 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.

ACL-Securities

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 June 30, 2025. For the corporate bond portfolio, the Company developed a metric that 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 is no expected credit loss, and therefore, no ACL-Securities were recognized on the corporate bond portfolio as of June 30, 2025. Of our held to maturity securities portfolio, four securities fair values were less each security's amortized cost as of June 30, 2025. 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 ACL-Securities was recorded for this security as of June 30, 2025.

Common Share Repurchases

The Company is incorporated in the state of Connecticut. Connecticut law does not provide for treasury shares, rather shares repurchased by the Company constitute authorized, but unissued shares. GAAP states that accounting for treasury stock shall conform to state law. Therefore, the cost of shares repurchased by the Company has been allocated to common stock balances.

Reclassification

Certain prior period amounts may be reclassified to conform to the 2025 financial statement presentation. These reclassifications only change the reporting categories and do not affect the consolidated results of operations or consolidated financial position of the Company.

Recent Accounting Pronouncements

The following section includes changes in accounting principles and potential effects of new accounting guidance and pronouncements.

Recently issued accounting pronouncements not yet adopted

ASU No. 2024-03—Income Statement: "Reporting Comprehensive Income - Expense Disaggregation Disclosures": The amendments in this update is to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses (including employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions. The amendments in this update are effective for annual periods beginning after December 15, 2026. ASU No. 2025-01—Income Statement: "Reporting Comprehensive Income - Expense Disaggregation Disclosures": Following the issuance of Update 2024-03, this amendment clarifies the initial effective date for entities that do not have an annual reporting period that ends on December 31 (referred to as non-calendar year-end entities). The amendment is effective for public business entities for annual reporting periods beginning after December 15, 2026. 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.

ASU No. 2023-09—Income Taxes (Topic 740): "Improvements to Income Tax Disclosures": The amendments in this update provide more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. For public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2024. 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.

Recently issued accounting pronouncements that have been adopted

ASU No. 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:

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

b. 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.

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

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

e. 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 are to 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 has adopted this ASU in December 2024 and it did not have a material impact on existing disclosures.

2. 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, 2025 were as follows:


	June 30, 2025
	Amortized Cost		Gross Unrealized				Fair Value
			Gains		Losses
	(In thousands)
Available for sale securities:
U.S. Government and agency obligations
Less than one year	$	25,087	$	23	$	(299)	$	24,811
Due from one through five years	47,244		69		(1,052)		46,261
Due from five through ten years	14,295		—		(544)		13,751
Due after ten years	6,462		—		(576)		5,886
Total U.S. Government and agency obligations	93,088		92		(2,471)		90,709

Corporate bonds

Due from five through ten years	12,500		—		(610)		11,890
Due after ten years	1,500		—		(169)		1,331
Total corporate bonds	14,000		—		(779)		13,221

Total available for sale securities	$	107,088	$	92	$	(3,250)	$	103,930

Held to maturity securities:
State agency and municipal obligations
Less than one year	$	6,842	$	32	$	—	$	6,874
Due from five through ten years	2,786		65		—		2,851
Due after ten years	26,806		1,604		(371)		28,039

Government-sponsored mortgage backed securities
No contractual maturity	—		—		—		—
Total held to maturity securities	$	36,434	$	1,701	$	(371)	$	37,764

The amortized cost, gross unrealized gains and losses and fair value of available for sale and held to maturity securities at December 31, 2024 were as follows:


	December 31, 2024
	Amortized Cost		Gross Unrealized				Fair Value
			Gains		Losses
	(In thousands)
Available for sale securities:
U.S. Government and agency obligations
Less than one year	$	24,920	$	66	$	(92)	$	24,894
Due from one through five years	47,541		—		(2,117)		45,424
Due from five through ten years	16,038		—		(906)		15,132
Due after ten years	6,944		—		(812)		6,132
Total U.S. Government and agency obligations	95,443		66		(3,927)		91,582
Corporate bonds


Due from five through ten years	15,500		—		(929)		14,571
Due after ten years	1,500		—		(225)		1,275
Total corporate bonds	17,000		—		(1,154)		15,846

Total available for sale securities	$	112,443	$	66	$	(5,081)	$	107,428

Held to maturity securities:
State agency and municipal obligations
Less than one year	$	6,820	$	37	$	—	$	6,857
Due from one through five years	2,808		—		(77)		2,731
Due after ten years	26,897		1,190		(1,013)		27,074
Total state and municipal obligations	36,525		1,227		(1,090)		36,662

Government-sponsored mortgage backed securities
No contractual maturity	28		1		—		29
Total held to maturity securities	$	36,553	$	1,228	$	(1,090)	$	36,691

There was one and no sales of investment securities during the six months ended June 30, 2025 or 2024, respectively.

At June 30, 2025 and December 31, 2024, 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, 2025 and December 31, 2024, the actual durations of the Company's available for sale securities were significantly shorter than the stated maturities.

As of June 30, 2025, the Company held marketable equity securities with a fair value of $2.2 million and an amortized cost of $2.3 million. At December 31, 2024, the Company held marketable equity securities with a fair value of $2.1 million and an amortized cost of $2.3 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, 2025 and December 31, 2024:


	Length of Time in Continuous Unrealized Loss Position
	Less Than 12 Months						12 Months or More						Total
	Fair Value		Unrealized Loss		Percent Decline from Amortized Cost		Fair Value		Unrealized Loss		Percent Decline from Amortized Cost		Fair Value		Unrealized Loss		Percent Decline from Amortized Cost
	(Dollars in thousands)

June 30, 2025
U.S. Government and agency obligations	$	—	$	—	—	%	$	60,637	$	(2,471)	3.92	%	$	60,637	$	(2,471)	3.92	%
Corporate bonds	—		—		—		13,221		(779)		5.57		13,221		(779)		5.57
State agency and municipal obligations	—		—		—		7,528		(371)		4.70		7,528		(371)		4.70
Total investment securities	$	—	$	—	—	%	$	81,386	$	(3,621)	4.26	%	$	81,386	$	(3,621)	4.26	%


	Length of Time in Continuous Unrealized Loss Position
	Less Than 12 Months						12 Months or More						Total
	Fair Value		Unrealized Loss		Percent Decline from Amortized Cost		Fair Value		Unrealized Loss		Percent Decline from Amortized Cost		Fair Value		Unrealized Loss		Percent Decline from Amortized Cost
	(Dollars in thousands)

December 31, 2024
U.S. Government and agency obligations	$	—	$	—	—	%	$	81,579	$	(3,927)	4.59	%	$	81,579	$	(3,927)	4.59	%
Corporate bonds	—		—		—		15,846		(1,154)		6.79		15,846		(1,154)		6.79
State agency and municipal obligations	7,361		(254)		(3.33)		3,802		(836)		18.03		11,163		(1,090)		8.89
Total investment securities	$	7,361	$	(254)	(3.33)	%	$	101,227	$	(5,917)	5.52	%	$	108,588	$	(6,171)	5.38	%

There were thirty-three and thirty-seven available for sale securities or held to maturity securities as of June 30, 2025 and December 31, 2024, respectively, in which the fair value of the security was less than the amortized cost of the security.

The U.S. 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.

The corporate bonds are investments in subordinated debt of federally insured banks, the majority of which are callable after five years of origination. The Company 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 June 30, 2025 until the decline in value has recovered or the security has matured.

3. Loans Receivable and ACL-Loans

The following table sets forth a summary of the loan portfolio at June 30, 2025 and December 31, 2024:


(In thousands)	June 30, 2025		December 31, 2024
Real estate loans:
Residential	$	34,978	$	42,766
Commercial	1,802,224		1,899,134
Construction	203,758		173,555
	2,040,960		2,115,455

Commercial business	559,221		515,125

Consumer	68,801		75,308
Total loans	2,668,982		2,705,888

ACL-Loans	(29,256)		(29,007)
Deferred loan origination fees, net	(3,984)		(3,922)

Loans receivable, net	$	2,635,742	$	2,672,959

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. The majority of commercial mortgage loans are collateralized by first or second mortgages on real estate.

Risk management

The Company has established credit policies applicable to each type of lending activity in which it engages. The Company evaluates the creditworthiness of each client and extends credit of up to 80% of the market value of the collateral, (85% maximum for owner occupied commercial real estate), depending on the client's creditworthiness and the type of collateral. The client’s ability to service the debt is monitored on an ongoing basis. Real estate is the primary form of collateral. Other important forms of collateral are business assets, deposits and marketable securities. 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 lien residential 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 ACL-Loans

Management segregates the loan portfolio into defined segments, which are used to develop and document a systematic method for determining the Company's ACL-Loans. The portfolio segments are segregated based on loan types and the underlying risk factors present in each loan type. Such risk factors are periodically reviewed by management and revised as deemed appropriate.

The Company's loan portfolio is segregated into the following portfolio segments:

Residential Real Estate: This portfolio segment consists of first mortgage loans secured by one-to-four family owner occupied residential properties for personal use located in the Company's market area. This segment also includes home equity loans and home equity lines of credit secured by owner occupied one-to-four family residential properties. Loans of this type were written at a combined maximum of 80% of the appraised value of the property and the Company requires a first or second lien position on the property. These loans can be affected by economic conditions and the values of the underlying properties.

Commercial Real Estate: This portfolio segment includes loans secured by commercial real estate, multi-family dwellings, owner-occupied commercial real estate and investor-owned one-to-four family dwellings. Loans secured by commercial real estate generally have larger loan balances and more credit risk than owner occupied one-to-four family mortgage loans.

Construction: This portfolio segment includes commercial construction loans for commercial development projects, including apartment buildings and condominiums, as well as office buildings, retail and other income producing properties and land loans, which are loans made with land as collateral. Construction and land development financing generally involves greater credit risk than long-term financing on improved, owner-occupied or leased real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the value of the property at completion of construction compared to the estimated cost (including interest) of construction and other assumptions. If the estimate of construction cost proves to be inaccurate, the Company may be required to advance additional funds beyond the amount originally committed in order to protect the value of the property. Moreover, if the estimated value of the completed project proves to be inaccurate, the client may hold a property with a value that is insufficient to assure full repayment through sale or refinance. Construction loans also expose the Company to the risks that improvements will not be completed on time in accordance with specifications and projected costs and that repayment will depend on the successful operation or sale of the properties, which may cause some clients to be unable to continue paying debt service, which exposes the Company to greater risk of non-payment and loss.

Commercial Business: This portfolio segment includes commercial business loans secured by assignments of corporate assets and personal guarantees of the business owners. Commercial business loans generally have higher interest rates and shorter terms than other loans, and their repayment generally depends on the successful operation of the client’s business.

Consumer: 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.

ACL-Loans

The following tables set forth the activity in the Company’s ACL-Loans for the three and six months ended June 30, 2025 and 2024, by portfolio segment:


	Residential Real Estate		Commercial Real Estate		Construction		Commercial Business		Consumer		Total
	(In thousands)
Three Months Ended June 30, 2025
Beginning balance	$	87	$	20,562	$	2,216	$	5,244	$	1,376	$	29,485
Charge-offs	—		—		—		(15)		(5)		(20)
Recoveries	—		—		—		112		10		122
(Credit) provision for credit losses	(22)		(1,270)		688		185		88		(331)
Ending balance	$	65	$	19,292	$	2,904	$	5,526	$	1,469	$	29,256


	Residential Real Estate		Commercial Real Estate		Construction		Commercial Business		Consumer		Total
	(In thousands)
Three Months Ended June 30, 2024
Beginning balance	$	133	$	21,666	$	1,543	$	4,078	$	571	$	27,991
Charge-offs	(9)		(522)		—		—		(12)		(543)
Recoveries	141		113		—		—		13		267
(Credit) provision for credit losses	(142)		1,216		729		6,569		(4)		8,368
Ending balance	$	123	$	22,473	$	2,272	$	10,647	$	568	$	36,083


	Residential Real Estate		Commercial Real Estate		Construction		Commercial Business		Consumer		Total
	(In thousands)
Six Months Ended June 30, 2025
Beginning balance	$	94	$	21,838	$	2,059	$	4,070	$	946	$	29,007
Charge-offs	—		(67)		—		(15)		(37)		(119)
Recoveries	—		—		—		116		46		162
(Credit) provision for credit losses	(29)		(2,479)		845		1,355		514		206
Ending balance	$	65	$	19,292	$	2,904	$	5,526	$	1,469	$	29,256


	Residential Real Estate		Commercial Real Estate		Construction		Commercial Business		Consumer		Total
	(In thousands)
Six Months Ended June 30, 2024


Beginning balance	$	149	$	20,950	$	1,699	$	4,562	$	586	$	27,946
Charge-offs	(141)		(3,828)		—		(197)		(61)		(4,227)
Recoveries	141		113		—		27		17		298
(Credit) provision for credit losses	(26)		5,238		573		6,255		26		12,066
Ending balance	$	123	$	22,473	$	2,272	$	10,647	$	568	$	36,083

We evaluate whether a modification, extension or renewal of a loan is a current period origination in accordance with GAAP. 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, 2025 and December 31, 2024 (dollars in thousands):


Term Loans
Amortized Cost Balances by Origination Year as of June 30, 2025


	2025		2024		2023		2022		2021		Prior		Total
Residential Real Estate Loans
Pass	$	—	$	—	$	—	$	—	$	—	$	31,995	$	31,995
Special Mention	—		—		—		—		—		295		295
Substandard	—		—		—		—		—		2,862		2,862
Doubtful	—		—		—		—		—		—		—
Total Residential Real Estate Loans	$	—	$	—	$	—	$	—	$	—	$	35,152	$	35,152
Residential Real Estate charge-off
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial Real Estate Loans
Pass	$	150,968	$	105,752	$	109,288	$	571,848	$	213,840	$	545,609	$	1,697,305
Special Mention	—		19,936		—		70,437		—		3,851		94,224
Substandard	—		—		—		580		8,688		7,099		16,367
Doubtful	—		—		—		—		—		—		—
Total Commercial Real Estate Loans	$	150,968	$	125,688	$	109,288	$	642,865	$	222,528	$	556,559	$	1,807,896
Commercial Real Estate charge-off
Current period charge-offs	$	—	$	—	$	—	$	—	$	67	$	—	$	67

Construction Loans
Pass	$	25,386	$	26,250	$	49,648	$	36,939	$	47,087	$	—	$	185,310
Special Mention	—		—		—		19,415		—		—		19,415
Substandard	—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—
Total Construction Loans	$	25,386	$	26,250	$	49,648	$	56,354	$	47,087	$	—	$	204,725
Construction charge-off
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial Business Loans
Pass	$	133,234	$	103,187	$	87,732	$	154,312	$	43,132	$	25,923	$	547,520
Special Mention	—		—		—		6,618		2		216		6,836
Substandard	—		52		114		—		6,733		—		6,899
Doubtful	—		—		—		—		—		26		26
Total Commercial Business Loans	$	133,234	$	103,239	$	87,846	$	160,930	$	49,867	$	26,165	$	561,281
Commercial Business charge-off
Current period charge-offs	$	15	$	—	$	—	$	—	$	—	$	—	$	15

Consumer Loans
Pass	$	8,020	$	22,407	$	10,070	$	27,746	$	—	$	47	$	68,290
Special Mention	—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—
Total Consumer Loans	$	8,020	$	22,407	$	10,070	$	27,746	$	—	$	47	$	68,290
Consumer charge-off
Current period charge-offs	$	37	$	—	$	—	$	—	$	—	$	—	$	37

Total Loans
Pass	$	317,608	$	257,596	$	256,738	$	790,845	$	304,059	$	603,574	$	2,530,420
Special Mention	—		19,936		—		96,470		2		4,362		120,770
Substandard	—		52		114		580		15,421		9,961		26,128
Doubtful	—		—		—		—		—		26		26
Total Loans	$	317,608	$	277,584	$	256,852	$	887,895	$	319,482	$	617,923	$	2,677,344
Total charge-off
Current period charge-offs	$	52	$	—	$	—	$	—	$	67	$	—	$	119


Term Loans
Amortized Cost Balances by Origination Year as of December 31, 2024


	2024		2023		2022		2021		2020		Prior		Total
Residential Real Estate Loans
Pass	$	—	$	—	$	—	$	—	$	—	$	39,560	$	39,560
Special Mention	—		—		—		—		—		366		366
Substandard	—		—		—		—		—		3,069		3,069
Doubtful	—		—		—		—		—		—		—
Total Residential Real Estate Loans	$	—	$	—	$	—	$	—	$	—	$	42,995	$	42,995
Residential Real Estate charge-off
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	141	$	141

Commercial Real Estate Loans
Pass	$	162,303	$	101,201	$	680,359	$	241,000	$	95,277	$	486,897	$	1,767,037
Special Mention	—		18,357		43,286		29,792		—		1,982		93,417
Substandard	—		—		27,081		9,194		5,488		1,610		43,373
Doubtful	—		—		—		—		—		1,400		1,400
Total Commercial Real Estate Loans	$	162,303	$	119,558	$	750,726	$	279,986	$	100,765	$	491,889	$	1,905,227
Commercial Real Estate charge-off
Current period charge-offs	$	—	$	—	$	—	$	522	$	8,184	$	4,405	$	13,111

Construction Loans
Pass	$	10,086	$	47,301	$	63,476	$	53,529	$	—	$	—	$	174,392
Special Mention	—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—
Total Construction Loans	$	10,086	$	47,301	$	63,476	$	53,529	$	—	$	—	$	174,392
Construction charge-off
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	1,771	$	1,771

Commercial Business Loans
Pass	$	143,267	$	98,718	$	179,999	$	49,351	$	5,708	$	26,413	$	503,456
Special Mention	—		665		3,454		1,949		—		20		6,088
Substandard	133		344		224		6,983		—		—		7,684
Doubtful	—		—		—		—		—		53		53
Total Commercial Business Loans	$	143,400	$	99,727	$	183,677	$	58,283	$	5,708	$	26,486	$	517,281
Commercial Business charge-off
Current period charge-offs	$	—	$	—	$	7,664	$	245	$	—	$	—	$	7,909

Consumer Loans
Pass	$	32,295	$	9,051	$	33,369	$	—	$	—	$	49	$	74,764
Special Mention	—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—
Total Consumer Loans	$	32,295	$	9,051	$	33,369	$	—	$	—	$	49	$	74,764
Consumer charge-off
Current period charge-offs	$	28	$	—	$	—	$	56	$	—	$	—	$	84

Total Loans
Pass	$	347,951	$	256,271	$	957,203	$	343,880	$	100,985	$	552,919	$	2,559,209
Special Mention	—		19,022		46,740		31,741		—		2,368		99,871
Substandard	133		344		27,305		16,177		5,488		4,679		54,126
Doubtful	—		—		—		—		—		1,453		1,453
Total Loans	$	348,084	$	275,637	$	1,031,248	$	391,798	$	106,473	$	561,419	$	2,714,659
Total charge-off
Current period charge-offs	$	28	$	—	$	7,664	$	823	$	8,184	$	6,317	$	23,016

Loans evaluated for impairment and the related ACL-Loans as of June 30, 2025 and December 31, 2024 were as follows:


	Portfolio		ACL-Loans
	(In thousands)
June 30, 2025
Loans individually evaluated for impairment:
Residential real estate	$	2,846	$	—
Commercial real estate	16,387		—
Construction	—		—
Commercial business	6,871		—
Consumer	37,753		—
Subtotal	63,857		—
Loans collectively evaluated for impairment:
Residential real estate	32,133		65
Commercial real estate	1,785,837		19,292
Construction	203,758		2,904
Commercial business	552,350		5,526
Consumer	31,047		1,469
Subtotal	2,605,125		29,256

Total	$	2,668,982	$	29,256


	Portfolio		ACL-Loans
	(In thousands)
December 31, 2024
Loans individually evaluated for impairment:
Residential real estate	$	3,052	$	—
Commercial real estate	44,814		—
Construction	—		—
Commercial business	7,672		—
Consumer	58,363		—
Subtotal	113,901		—
Loans collectively evaluated for impairment:
Residential real estate	39,714		94
Commercial real estate	1,854,320		21,838
Construction	173,555		2,059
Commercial business	507,453		4,070
Consumer	16,945		946
Subtotal	2,591,987		29,007

Total	$	2,705,888	$	29,007

Credit quality indicators

To measure credit risk for the loan portfolios, the Company employs a credit risk rating system. 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 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.

A “special mention” (6) loan has a potential weakness which, if uncorrected, may result in a deterioration of the repayment prospects or inadequately protect the Company’s credit position at some time in the future. “Substandard” (7) loans have a well-defined weakness or weaknesses that jeopardize the full repayment of the debt. A loan rated “doubtful” (8) has all the weaknesses inherent in a substandard loan and which, in addition, make collection or liquidation in full highly questionable and improbable when considering existing facts, conditions, and values. Loans classified as “loss” (9) are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value; rather, it is not practical or desirable to defer charging off this asset even though partial recovery may be made in the future.

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, 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, 2025 and December 31, 2024:


	Commercial Credit Quality Indicators
	June 30, 2025								December 31, 2024
	Commercial Real Estate		Construction		Commercial Business		Total		Commercial Real Estate		Construction		Commercial Business		Total
	(In thousands)
Pass	$	1,692,203	$	184,475	$	545,569	$	2,422,247	$	1,767,482	$	173,555	$	501,432	$	2,442,469
Special Mention	93,634		19,283		6,781		119,698		86,838		—		6,020		92,858
Substandard	16,387		—		6,845		23,232		43,413		—		7,619		51,032
Doubtful	—		—		26		26		1,401		—		54		1,455
Loss	—		—		—		—		—		—		—		—
Total loans	$	1,802,224	$	203,758	$	559,221	$	2,565,203	$	1,899,134	$	173,555	$	515,125	$	2,587,814


	Residential and Consumer Credit Quality Indicators
	June 30, 2025						December 31, 2024
	Residential Real Estate		Consumer		Total		Residential Real Estate		Consumer		Total
	(In thousands)
Pass	$	31,842	$	68,800	$	100,642	$	39,359	$	75,308	$	114,667
Special Mention	291		—		291		356		—		356
Substandard	2,846		—		2,846		3,051		—		3,051
Doubtful	—		—		—		—		—		—
Loss	—		—		—		—		—		—
Total loans	$	34,979	$	68,800	$	103,779	$	42,766	$	75,308	$	118,074

Loan portfolio aging analysis

When a loan is 15 days past due, the Company sends the borrower a late notice. The Company attempts to contact the borrower by phone if the delinquency is not corrected promptly after the notice has been sent. When the loan is 30 days past due, the Company mails the borrower a letter reminding the borrower of the delinquency and attempts to contact the borrower personally to determine the reason for the delinquency and ensure the borrower understands the terms of the loan. If necessary, after the 90th day of delinquency, the Company may take other appropriate legal action. A summary report of all loans 30 days or more past due is provided to the Board of Directors of the Company periodically. Loans greater than 90 days past due are generally put on nonaccrual status. A nonaccrual loan is restored to accrual status when it is no longer delinquent and collectability of interest and principal is no longer in doubt. 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, 2025 and December 31, 2024:


	June 30, 2025
	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Loans
	(In thousands)
Real estate loans:
Residential real estate	$	291	$	—	$	617	$	908	$	34,070	$	34,978
Commercial real estate	145		—		16,387		16,532		1,785,692		1,802,224
Construction	—		—		—		—		203,758		203,758
Commercial business	18		33		6,680		6,731		552,490		559,221
Consumer	—		—		—		—		68,801		68,801
Total loans	$	454	$	33	$	23,684	$	24,171	$	2,644,811	$	2,668,982


	December 31, 2024
	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Loans
	(In thousands)
Real estate loans:
Residential real estate	$	130	$	226	$	652	$	1,008	$	41,758	$	42,766
Commercial real estate	359		—		35,585		35,944		1,863,190		1,899,134
Construction	—		—		—		—		173,555		173,555
Commercial business	4		11		7,143		7,158		507,967		515,125
Consumer	—		—		—		—		75,308		75,308
Total loans	$	493	$	237	$	43,380	$	44,110	$	2,661,778	$	2,705,888

There were no loans delinquent greater than 90 days and still accruing interest as of June 30, 2025 or December 31, 2024.

Loans on nonaccrual status

The following is a summary of nonaccrual loans by portfolio segment as of June 30, 2025 and December 31, 2024:


	June 30, 2025		December 31, 2024
	(In thousands)
Residential real estate	$	617	$	791
Commercial real estate	16,387		44,814
Commercial business	6,871		7,672
Construction	—		—
Consumer	—		—
Total	$	23,875	$	53,277

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, 2025 and 2024 was $1.1 million and $1.2 million, respectively.

At June 30, 2025 and December 31, 2024, there were no commitments to lend additional funds to any borrower on nonaccrual status. Nonaccrual loans with no specific reserve totaled $23.9 million and $53.3 million at June 30, 2025 and December 31, 2024, respectively, as these loans were deemed to be adequately collateralized.

Individually evaluated loans

An individually evaluated loan is generally one for which it is probable, based on current information, that the Company will not collect all the amounts due in accordance with the contractual terms of the loan. Individually evaluated loans are individually evaluated for credit losses.

The Company also individually evaluates 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 June 30, 2025 and December 31, 2024.


	Carrying Amount				Unpaid Principal Balance				Associated ACL-Loans
	June 30, 2025		December 31, 2024		June 30, 2025		December 31, 2024		June 30, 2025		December 31, 2024
	(In thousands)
Individually evaluated loans without a valuation allowance:
Residential real estate	$	2,846	$	3,052	$	3,145	$	3,332	$	—	$	—
Commercial real estate	16,387		44,814		27,047		55,936		—		—
Construction	—		—		—		—		—		—
Commercial business	6,871		7,672		7,947		8,782		—		—
Consumer	37,753		58,363		37,753		58,363		—		—
Total individually evaluated loans without a valuation allowance	63,857		113,901		75,892		126,413		—		—

Individually evaluated loans with a valuation allowance:
Residential real estate	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate	—		—		—		—		—		—
Construction	—		—		—		—		—		—
Commercial business	—		—		—		—		—		—
Consumer	—		—		—		—		—		—
Total individually evaluated loans with a valuation allowance	—		—		—		—		—		—
Total individually evaluated loans	$	63,857	$	113,901	$	75,892	$	126,413	$	—	$	—

The following tables summarize 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, 2025 and 2024:


	Average Carrying Amount				Interest Income Recognized
	Three Months Ended June 30,				Three Months Ended June 30,
	2025		2024		2025		2024
	(In thousands)
Individually evaluated loans without a valuation allowance:
Residential real estate	$	2,979	$	3,640	$	43	$	42
Commercial real estate	17,371		55,291		84		552
Commercial business	7,000		12,423		55		211
Construction	—		—		—		—
Consumer	40,489		26,156		382		400
Total individually evaluated loans without a valuation allowance	67,839		97,510		564		1,205
Individually evaluated loans with a valuation allowance:
Residential real estate	$	—	$	—	$	—	$	—
Commercial real estate	—		—		—		—
Commercial business	—		8,516		—		878
Construction	—		9,382		—		—
Consumer	—		—		—		—
Total individually evaluated loans with a valuation allowance	—		17,898		—		878
Total individually evaluated loans	$	67,839	$	115,408	$	564	$	2,083


	Average Carrying Amount				Interest Income Recognized
	Six Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
	(In thousands)
Individually evaluated loans without a valuation allowance:
Residential real estate	$	3,025	$	3,656	$	103	$	85
Commercial real estate	17,766		57,247		129		1,094
Commercial business	7,322		12,745		70		618
Construction	—		—		—		—
Consumer	47,369		25,840		775		736
Total individually evaluated loans without a valuation allowance	75,482		99,488		1,077		2,533
Individually evaluated loans with a valuation allowance:
Residential real estate	$	—	$	—	$	—	$	—
Commercial real estate	—		—		—		—
Commercial business	—		8,607		—		1,039
Construction	—		9,382		—		—
Consumer	—		—		—		—
Total individually evaluated loans with a valuation allowance	—		17,989		—		1,039
Total individually evaluated loans	$	75,482	$	117,477	$	1,077	$	3,572

Loan Modifications

A loan will be considered modified as defined by ASC 326 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 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 ASC 326 at June 30, 2025. There was one new loan modification reportable under ASC 326 for $4.0 million at December 31, 2024. There were no nonaccrual modified loans at June 30, 2025. There was one nonaccrual modified loan at December 31, 2024. There were no loans modified that re-defaulted at June 30, 2025 and December 31, 2024.

Allowance for credit losses (ACL)-Unfunded Commitments

The Company has recorded ACL-Unfunded Commitments in Accrued expenses and other liabilities. 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, 2025 and June 30, 2024:


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
	(In thousands)
Balance at beginning of period	$	681	$	911	$	756	$	926


(Credit) for credit losses (unfunded commitments)	(79)		(185)		(154)		(200)
Balance at end of period	$	602	$	726	$	602	$	726

Components of (Credit) Provision for Credit Losses

The following table summarizes the Provision for credit losses for the three and six months ended June 30, 2025 and June 30, 2024:


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
	(In thousands)
(Credit) provision for credit losses (loans)	$	(331)	$	8,368	$	206	$	12,066
(Credit) for credit losses (unfunded commitments)	(80)		(185)		(154)		(200)
(Credit) provision for credit losses	$	(411)	$	8,183	$	52	$	11,866

4. Shareholders' Equity

Common Stock

The Company has 10,000,000 shares authorized and 7,873,387 shares issued and outstanding at June 30, 2025 and 10,000,000 shares authorized and 7,859,873 shares issued and outstanding at December 31, 2024. The Company's stock is traded on the Nasdaq Global Market under the ticker symbol BWFG.

Dividends

The Company’s shareholders are entitled to dividends when and if declared by the Board of Directors out of funds legally available. The ability of the Company to pay dividends depends, in part, on the ability of the Bank to pay dividends to the Parent Corporation. In accordance with Connecticut statutes, regulatory approval is required to pay dividends in excess of the Bank’s profits retained in the current year plus retained profits from the previous two years. The Bank is also prohibited from paying dividends that would reduce its capital ratios below minimum regulatory requirements.

Issuer Purchases of Equity Securities

On December 19, 2018, the Company's Board of Directors authorized a share repurchase program of up to 400,000 shares of the Company's Common Stock ("Prior Plan") and, on October 27, 2021, the Company’s Board of Directors authorized the repurchase of an additional 200,000 shares under the Prior Plan. During the year ended December 31, 2024, the Company purchased 85,990 shares of its Common Stock at a weighted average of $24.82 per share. The Company purchased 535,802 shares of the Company's common stock pursuant to the Prior Plan.

On October 28, 2024, the Company announced that on October 23, 2024, its Board of Directors authorized a share repurchase plan ("New Plan"). Under the terms of the New Plan, the Company is authorized to buy back up to 250,000 shares of its outstanding common stock. In connection with the authorization of the New Plan, the Company terminated the Prior Plan. During the year ended December 31, 2024, the Company purchased no shares under the New Plan.

The Company intends to accomplish the share repurchases through open market transactions, though the Company could accomplish repurchases through other means, such as privately negotiated transactions. The timing, price and volume of repurchases will be based on market conditions, relevant securities laws and other factors. 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 Company's discretion. During the six months ended June 30, 2025, the Company purchased 44,550 shares of its Common Stock at a weighted average price of $29.93 per share.

5. Comprehensive Income

Comprehensive income represents the sum of net income and items of other comprehensive income or loss, including net unrealized gains or losses on securities available for sale and net unrealized gains or losses on derivatives. The Company's derivative instruments are utilized to manage economic risks, including interest rate risk. 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 comprehensive income or loss for the three and six months ended June 30, 2025 and June 30, 2024 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 six months ended June 30, 2025 and June 30, 2024:


	Net Unrealized Gain (Loss) on Available for Sale Securities		Net Unrealized Gain (Loss) on Interest Rate Swaps		Total
	(In thousands)
Balance at March 31, 2025	$	(2,916)	$	1,720	$	(1,196)
Other comprehensive income (loss) before reclassifications, net of tax	504		(68)		436
Amounts reclassified from accumulated other comprehensive (loss), net of tax	—		(143)		(143)
Net other comprehensive income (loss)	504		(211)		293
Balance at June 30, 2025	$	(2,412)	$	1,509	$	(903)


	Net Unrealized Gain (Loss) on Available for Sale Securities		Net Unrealized Gain (Loss) on Interest Rate Swaps		Total
	(In thousands)
Balance at March 31, 2024	$	(5,926)	$	4,207	$	(1,719)
Other comprehensive income before reclassifications, net of tax	304		420		724
Amounts reclassified from accumulated other comprehensive (loss), net of tax	—		(961)		(961)
Net other comprehensive income (loss)	304		(541)		(237)
Balance at June 30, 2024	$	(5,622)	$	3,666	$	(1,956)


	Net Unrealized Gain (Loss) on Available for Sale Securities		Net Unrealized Gain (Loss) on Interest Rate Swaps		Total
	(In thousands)
Balance at December 31, 2024	$	(3,832)	$	2,588	$	(1,244)
Other comprehensive income (loss) before reclassifications, net of tax	1,420		(469)		951
Amounts reclassified from accumulated other comprehensive (loss), net of tax	—		(610)		(610)
Net other comprehensive income (loss)	1,420		(1,079)		341
Balance at June 30, 2025	$	(2,412)	$	1,509	$	(903)


	Net Unrealized Gain (Loss) on Available for Sale Securities		Net Unrealized Gain (Loss) on Interest Rate Swaps		Total
	(In thousands)
Balance at December 31, 2023	$	(5,810)	$	4,146	$	(1,664)
Other comprehensive income before reclassifications, net of tax	188		1,695		1,883
Amounts reclassified from accumulated other comprehensive (loss), net of tax	—		(2,175)		(2,175)
Net other comprehensive income (loss)	188		(480)		(292)
Balance at June 30, 2024	$	(5,622)	$	3,666	$	(1,956)

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
	2025		2024		2025		2024
	(In thousands)




Derivatives:
Unrealized gains on derivatives	$	187	$	1,257	$	799	$	2,514	Interest expense on borrowings
Tax expense	(44)		(296)		(189)		(339)		Income tax expense
Net of tax	$	143	$	961	$	610	$	2,175

6. Earnings per share ("EPS")

Unvested restricted stock awards that contain non-forfeitable rights to dividends are participating securities and are included in the computation of EPS pursuant to the two-class method. The two-class method is an earnings allocation formula that determines EPS for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. The Company’s unvested restricted stock awards qualify as participating securities.

Net income is allocated between the common stock and participating securities pursuant to the two-class method. Basic EPS is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period, excluding participating unvested restricted stock awards.

Diluted EPS is computed in a similar manner, except that the denominator includes the number of additional common shares that would have been outstanding if potentially dilutive common shares were issued using the treasury stock method.

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 June 30,
	2025		2024		2025		2024
	(In thousands, except per share data)
Net income	$	9,088	$	1,118	$	15,976	$	4,881
Dividends to participating securities(1)	26		(40)		53		(79)
Undistributed earnings allocated to participating securities(1)	(125)		14		(241)		(52)
Net income for earnings per share calculation	$	8,989	$	1,092	$	15,788	$

Bankwell Financial Group, Inc. 10-Q