Bankwell Financial Group Inc.

03/04/2026 | Press release | Distributed by Public on 03/04/2026 14:34

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations
This section presents management's perspective on our financial condition and results of operations. The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes contained elsewhere in this annual report. To the extent that this discussion describes prior performance, the descriptions relate only to the periods listed, which may not be indicative of future financial outcomes. In addition to historical information, this discussion contains forward looking statements that involve risks, uncertainties and assumptions that could cause results to differ materially from management's expectations. Factors that could cause such differences are discussed in the sections titled "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors". We assume no obligation to update any of these forward-looking statements.
General
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 relationships. The Bank operates full-service branches in New Canaan, Stamford, Fairfield, Westport, Darien, Norwalk, and Hamden, Connecticut. The Bank also operates in a limited service Domestic Representative Office in New Canaan, Connecticut and in Garden City, New York. During 2025, the Bank received regulatory approval from the FDIC, the CT DOB, and the NY DFS to establish a new full-service branch in Brooklyn, New York, which opened during the first quarter of 2026.
The following discussion and analysis presents our results of operations and financial condition on a consolidated basis. However, because we conduct all of our material business operations through the Bank, the discussion and analysis relates to activities primarily conducted at the Bank.
We generate most of our revenue from interest on loans and investments and fee-based revenues. Our primary source of funding for our loans is deposits. Our largest expenses are interest on these deposits and salaries and related employee benefits. We measure our performance primarily through our net interest margin, efficiency ratio, ratio of ACL-Loans to total loans, return on average assets and return on average equity, among other metrics, while maintaining appropriate regulatory leverage and risk-based capital ratios.
Selected Financial Data
The following table sets forth selected consolidated financial data as of the dates and for the periods presented. The selected consolidated balance sheet data as of December 31, 2025 and 2024 and the selected consolidated statement of income data for the years ended December 31, 2025 and 2024 have been derived mainly from our audited consolidated financial statements and related notes that we have included elsewhere in this Annual Report. The selected consolidated balance sheet data as of December 31, 2023, 2022, and 2021 and the selected consolidated statement of income data for the years ended December 31, 2023, 2022, and 2021 has been derived mainly from audited consolidated financial statements that are not presented in this Annual Report.
The selected historical consolidated financial data as of any date and for any period are not necessarily indicative of the results that may be achieved as of any future date or for any future period. You should read the following selected statistical and financial data in conjunction with the more detailed information contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes that we have presented elsewhere in this Annual Report.
Selected Financial Data
At or For the Years Ended December 31,
2025 2024 2023 2022 2021
(Dollars in thousands, except per share data)
Statements of Income:
Interest income $ 198,327 $ 191,994 $ 188,454 $ 117,945 $ 81,376
Interest expense 99,392 108,712 93,986 23,202 13,490
Net interest income 98,935 83,282 94,468 94,743 67,886
Provision (credit) for credit losses 1,040 22,620 866 5,437 (57)
Net interest income after provision for credit losses 97,895 60,662 93,602 89,306 67,943
Noninterest income 9,388 3,718 4,842 3,040 5,657
Noninterest expense 58,788 51,051 50,401 44,363 39,739
Income before income tax 48,495 13,329 48,043 47,983 33,861
Income tax expense 13,297 3,559 11,380 10,554 7,275
Net income 35,198 9,770 36,663 37,429 26,586
Per Share Data:
Basic earnings per share $ 4.49 $ 1.24 $ 4.71 $ 4.84 $ 3.38
Diluted earnings per share $ 4.45 $ 1.23 $ 4.67 $ 4.79 $ 3.36
Book value per share (end of period)(a)
39.19 35.43 34.84 31.73 26.53
Tangible book value per share (end of period)(a)(b)
38.85 35.09 34.50 31.39 26.19
Dividend payout ratio(b)(e)
17.98 % 65.04 % 17.13 % 16.70 % 19.05 %
Shares outstanding (end of period)(a)
7,693,121 7,635,998 7,628,288 7,516,699 7,612,807
Weighted average shares outstanding-basic 7,750,191 7,710,076 7,587,768 7,563,363 7,706,407
Weighted average shares outstanding-diluted 7,826,280 7,737,952 7,647,411 7,640,218 7,761,811
Performance Ratios:
Return on average assets(b)(f)
1.09 % 0.31 % 1.13 % 1.44 % 1.17 %
Return on average common shareholders' equity(b)(f)
12.32 % 3.60 % 14.55 % 16.72 % 13.86 %
Average shareholders' equity to average assets(b)(f)
8.82 % 8.48 % 7.74 % 8.61 % 8.46 %
Net interest margin(b)(f)
3.16 % 2.70 % 2.98 % 3.78 % 3.17 %
Efficiency ratio(b)
54.1 % 57.9 % 50.8 % 45.4 % 53.9 %
Asset Quality Ratios:
Total past due loans to total loans(c)
0.31 % 1.63 % 0.78 % 0.60 % 1.72 %
Nonperforming loans to total loans(c)
0.57 % 1.97 % 1.81 % 0.61 % 0.88 %
Nonperforming assets to total assets(d)
0.49 % 1.88 % 1.53 % 0.51 % 0.68 %
ACL-Loans to nonperforming loans 188.33 % 54.45 % 56.79 % 136.43 % 101.90 %
ACL-Loans to total loans(c)
1.08 % 1.07 % 1.03 % 0.84 % 0.89 %
Net (recoveries) charge-offs to average loans(b)(f)
(0.01) % 0.81 % 0.03 % - % 0.23 %
Statements of Financial Condition:
Total assets $ 3,359,859 $ 3,268,476 $ 3,215,482 $ 3,252,449 $ 2,456,264
Gross portfolio loans(c)
2,840,072 2,705,888 2,718,607 2,675,448 1,894,881
Investment securities 192,122 146,099 127,623 121,634 108,409
Deposits 2,829,481 2,787,570 2,736,757 2,800,818 2,123,998
FHLB borrowings 110,000 90,000 90,000 90,000 50,000
Subordinated debt 69,697 69,451 69,205 68,959 34,441
Total equity 301,489 270,520 265,752 238,469 201,987
Capital Ratios:
Tier 1 capital to average assets
Bankwell Bank 10.56 % 10.09 % 9.81 % 9.88 % 9.94 %
Tier 1 capital to risk-weighted assets
Bankwell Bank 11.87 % 11.64 % 11.30 % 10.28 % 11.18 %
Total capital to risk-weighted assets
Bankwell Bank 12.94 % 12.70 % 12.32 % 11.07 % 12.00 %
Total shareholders' equity to total assets 8.97 % 8.28 % 8.26 % 7.33 % 8.22 %
Tangible common equity ratio(b)
8.90 % 8.20 % 8.19 % 7.26 % 8.13 %
(a)Excludes unvested restricted stock awards.
(b)This measure is not a measure recognized under Generally Accepted Accounting Principles ("GAAP") and is therefore considered to be a non-GAAP financial measure. See "Non-GAAP Financial Measures" for a description of this measure and a reconciliation of this measure to its most directly comparable GAAP measure.
(c)Calculated using the principal amounts outstanding on loans.
(d)Nonperforming assets consist of nonperforming loans and other real estate owned.
(e)The dividend payout ratio is the dividends per share divided by diluted earnings per share.
(f)Return on average assets is calculated by dividing net income by average assets. Return on average common shareholders' equity is calculated by dividing net income by average shareholders' equity. Average shareholders' equity to average assets is calculated by dividing average shareholders' equity by average assets. Net interest margin is calculated by dividing net interest income (interest income minus interest expense) by average earning assets. Net loan charge-offs as a percentage of average loans is calculated by dividing net loan (charge offs) recoveries by average total loans.
NON-GAAP FINANCIAL MEASURES
We identify "efficiency ratio", "net interest margin", "tangible common equity ratio", "tangible book value per share", "total revenue", "return on average assets", and "return on average common shareholders' equity" as "non-GAAP financial measures." In accordance with the SEC's rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles as in effect from time to time in the United States in our statements of income, balance sheet or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures or ratios or statistical measures calculated using exclusively either financial measures calculated in accordance with GAAP, operating measures or other measures that are not non-GAAP financial measures or both.
The non-GAAP financial measures that we discuss in this annual report should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we discuss in this annual report may differ from that of other companies reporting measures with similar names. You should understand how such other banking organizations calculate their financial measures similar or with names similar to the non-GAAP financial measures we have discussed in this annual report when comparing such non-GAAP financial measures.
Efficiency ratio is defined as non-interest expenses, less merger and acquisition related expenses, other real estate owned expenses and amortization of intangible assets, divided by our operating revenue, which is equal to net interest income plus non-interest income excluding gains and losses on sales of securities and gains and losses on other real estate owned. In our judgment, the adjustments made to operating revenue allow investors and analysts to better assess our operating expenses in relation to our core operating revenue by removing the volatility that is associated with certain one-time items and other discrete items that are unrelated to our core business.
Tangible common equity is defined as total shareholders' equity, excluding preferred stock, less goodwill and other intangible assets. We believe that this measure is important to many investors in the marketplace who are interested in changes from period to period in common shareholders' equity exclusive of changes in intangible assets. Goodwill, an intangible asset that is recorded in a purchase business combination, has the effect of increasing both common equity and assets while not increasing our tangible common equity or tangible assets.
Tangible common equity ratio is defined as the ratio of tangible common equity divided by total assets less goodwill and other intangible assets. We believe that this measure is important to many investors in the marketplace who are interested in relative changes from period to period in common equity and total assets, each exclusive of changes in intangible assets. We believe that the most directly comparable GAAP financial measure is total shareholders' equity to total assets.
Tangible book value per share is defined as book value, excluding the impact of goodwill and other intangible assets, if any, divided by shares of our common stock outstanding, excluding unvested restricted stock awards.
Total revenue is defined as the sum of net interest income before provision of loan losses and noninterest income.
Return on average common shareholders' equity is defined as net income attributable to common shareholders divided by total average shareholders' equity less average preferred stock, if any.
The information provided below presents a reconciliation of each of our non-GAAP financial measures to the most directly comparable GAAP financial measure.
Years Ended December 31,
2025 2024 2023 2022 2021
(Dollars in thousands, except per share data)
Efficiency Ratio
Noninterest expense $ 58,788 $ 51,051 $ 50,401 $ 44,363 $ 39,739
Less: other real estate owned expenses 269 707 - - -
Less: Amortization of intangibles - - - - 76
Adjusted noninterest expense (numerator) $ 58,519 $ 50,344 $ 50,401 $ 44,363 $ 39,663
Net interest income $ 98,935 $ 83,282 $ 94,468 $ 94,743 $ 67,886
Noninterest income 9,388 3,718 4,842 3,040 5,657
Adjustments for: gains/(losses) on sales of securities - - - - -
Adjustments for: gains/(losses) on sale of other real estate owned 238 - - - -
Adjusted operating revenue (denominator) $ 108,085 $ 87,000 $ 99,310 $ 97,783 $ 73,543
Efficiency ratio 54.1 % 57.9 % 50.8 % 45.4 % 53.9 %
Tangible Common Equity and
Tangible Common Equity/Tangible Assets
Total shareholders' equity $ 301,489 $ 270,520 $ 265,752 $ 238,469 $ 201,987
Less: preferred stock - - - - -
Common shareholders' equity 301,489 270,520 265,752 238,469 201,987
Less: Intangible assets 2,589 2,589 2,589 2,589 2,589
Tangible Common shareholders' equity $ 298,900 $ 267,931 $ 263,163 $ 235,880 $ 199,398
Total assets $ 3,359,859 $ 3,268,476 $ 3,215,482 $ 3,252,449 $ 2,456,264
Less: Intangible assets 2,589 2,589 2,589 2,589 2,589
Tangible assets $ 3,357,270 $ 3,265,887 $ 3,212,893 $ 3,249,860 $ 2,453,675
Tangible common shareholders' equity to tangible assets 8.90 % 8.20 % 8.19 % 7.26 % 8.13 %
Tangible Book Value per Share
Total shareholders' equity $ 301,489 $ 270,520 $ 265,752 $ 238,469 $ 201,987
Less: preferred stock - - - - -
Common shareholders' equity 301,489 270,520 265,752 238,469 201,987
Less: Intangible assets 2,589 2,589 2,589 2,589 2,589
Tangible common shareholders' equity $ 298,900 $ 267,931 $ 263,163 $ 235,880 $ 199,398
Common shares issued 7,899,943 7,859,873 7,882,616 7,730,699 7,803,166
Less: shares of unvested restricted stock 206,822 223,875 254,328 214,000 190,359
Common shares outstanding 7,693,121 7,635,998 7,628,288 7,516,699 7,612,807
Book value per share $ 39.19 $ 35.43 $ 34.84 $ 31.73 $ 26.53
Less: effects of intangible assets 0.34 0.34 0.34 0.34 0.34
Tangible Book Value per Common Share $ 38.85 $ 35.09 $ 34.50 $ 31.39 $ 26.19
Total Revenue
Net interest income $ 98,935 $ 83,282 $ 94,468 $ 94,743 $ 67,886
Add: noninterest income 9,388 3,718 4,842 3,040 5,657
Total Revenue $ 108,323 $ 87,000 $ 99,310 $ 97,783 $ 73,543
Noninterest income as a percentage of total revenue 8.67 % 4.27 % 4.88 % 3.11 % 7.69 %
Return on Average Common Shareholders' Equity
Net Income Attributable to Common Shareholders $ 35,198 $ 9,770 $ 36,663 $ 37,429 $ 26,586
Total average shareholders' equity $ 285,611 $ 271,200 $ 252,061 $ 223,874 $ 191,808
Less: average preferred stock - - - - -
Average Common Shareholders' Equity $ 285,611 $ 271,200 $ 252,061 $ 223,874 $ 191,808
Return on Average Common Shareholders' Equity 12.32 % 3.60 % 14.55 % 16.72 % 13.86 %
Executive Overview
We strive to be the preferred banking provider, offering a compelling alternative to larger institutions. Our strategy rests on our competitive strengths:
•Strategic Market Reach: While we serve our client base within 100 miles of our branch network, we also selectively pursue commercial banking opportunities beyond this radius, leveraging established business relationships and technology to support our clients' growth.
•Experienced Leadership: Our Executive Management Team brings a proven track record of success and deep industry expertise.
•Dedicated Board of Directors: Our Board combines valuable expertise with close community ties, ensuring we understand and respond to local needs and are positioned to capitalize on market opportunities.
•Disciplined Risk Management: We employ a robust and proactive risk management framework to safeguard assets, ensure regulatory compliance, and support sustainable growth.
•Strong Capital Position: Our capital position has facilitated our growth and is integral to the execution of our business plan, and;
•Scalable Operating Platform: Designed for efficiency and scalability, our platform supports our growth and provides a seamless customer experience.
Key Financial Measures
The primary measures we use to evaluate and manage our financial results are set forth in the tables below. Although we believe these measures are meaningful in evaluating our results and financial condition, they may not be directly comparable to similar measures used by other financial services companies and may not provide an appropriate basis to compare our results or financial condition to the results or financial condition of our competitors. The following tables set forth the key financial measures we use to evaluate the success of our business and our financial position and operating performance.
Key Financial Measures(a)
At or For the Years Ended December 31,
2025 2024
(Dollars in thousands, except per share data)
Selected balance sheet measures:
Total assets $ 3,359,859 $ 3,268,476
Gross portfolio loans 2,840,072 2,705,888
Deposits 2,829,481 2,787,570
FHLB borrowings 110,000 90,000
Subordinated debt 69,697 69,451
Total equity 301,489 270,520
Selected statement of income measures:
Total revenue(b)
108,323 87,000
Net interest income before provision for credit losses 98,935 83,282
Income before income tax expense 48,495 13,329
Net income 35,198 9,770
Basic earnings per share $ 4.49 $ 1.24
Diluted earnings per share $ 4.45 $ 1.23
Key Financial Measures(a)
At or For the Years Ended December 31,
2025 2024
Other financial measures and ratios:
Return on average assets 1.09 % 0.31 %
Return on average common shareholders' equity(b)
12.32 % 3.60 %
Net interest margin(b)
3.16 % 2.70 %
Efficiency ratio(b)
54.1 % 57.9 %
Tangible book value per share (end of period)(b)(d)
$ 38.85 $ 35.09
Net (recoveries) charge-offs to average loans(c)
(0.01) % 0.81 %
Nonperforming assets to total assets(e)
0.49 % 1.88 %
ACL-Loans to nonperforming loans 188.33 % 54.45 %
ACL-Loans to total loans(c)
1.08 % 1.07 %
(a)We derived the selected balance sheet measures as of December 31, 2025 and 2024 and the selected statement of income measures for the years ended December 31, 2025 and 2024 from our audited consolidated financial statements included elsewhere in this annual report. Average balances have been computed using daily averages. Our historical results may not be indicative of our results for any future period.
(b)This measure is not a measure recognized under GAAP and is therefore considered to be a non-GAAP financial measure. See "Non-GAAP Financial Measures" for a description of this measure and a reconciliation of this measure to its most directly comparable GAAP measure.
(c)Calculated using the principal amounts outstanding on loans.
(d)Excludes unvested restricted stock awards.
(e)Nonperforming assets consist of nonperforming loans and other real estate owned.
Critical Accounting Policies and Estimates
The discussion and analysis of our results of operations and financial condition are based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires us to make significant estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from our current estimates, as a result of changing conditions and future events.
We believe that accounting estimates related to the measurement of the ACL-Loans, the valuation of derivative instruments, investment securities, and deferred income taxes are particularly critical and susceptible to significant near-term change.
Allowance for Credit Losses-Loans ("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 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.
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. This 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 uses third-party software that incorporates multiple models to estimate expected credit losses in calculating the ACL.
For collectively evaluated loans and related unfunded commitments, the Company uses third-party software that incorporates multiple models to estimate expected credit losses in calculating the 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.
Individually evaluated loans consist of loans with credit quality indicators which are substandard or doubtful. Additionally, when loans do not share risk characteristics with other financial assets they are also evaluated individually. Management applies its normal loan review procedures in making these judgments. The Company individually evaluates all insurance premium
loans as well as cash-secured loans to individuals. 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 these loan types, 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.
Allowance for Credit Losses - Securities ("ACL-Securities")
Pursuant to ASC 326, the Company individually evaluates the available for sale debt securities and held to maturity securities for impairment credit losses quarterly. 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, 2025. 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, 2025. Of our held to maturity securities portfolio, four securities' fair values were less than their respective amortized costs as of December 31, 2025. Since these are highly rated state agency and municipal obligations, the Company's expectation of nonpayment of the amortized cost basis is zero. No allowance for ACL-Securities was recorded for these securities as of December 31, 2025.
Earnings and Performance Overview
2025 Earnings Overview
Our net income for the year ended December 31, 2025 was $35.2 million, an increase of $25.4 million, or 260.3%, compared to the year ended December 31, 2024. Diluted earnings per share was $4.45 for the year ended December 31, 2025, compared to diluted earnings per share of $1.23 for the year ended December 31, 2024. Our returns on average shareholders' equity and average assets for the year ended December 31, 2025, were 12.32% and 1.09%, respectively, compared to 3.60% and 0.31%, respectively for the year ended December 31, 2024. Net income for the year ended December 31, 2025 was $35.2 million, versus $9.8 million for the year ended December 31, 2024. The increase in net income for the year ended December 31, 2025 was primarily due to the aforementioned increase in revenues, a decrease in provision for credit losses, partially offset by an increase in income tax expense.
Revenues (net interest income plus noninterest income) for the year ended December 31, 2025 were $108.3 million, versus $87.0 million for the year ended December 31, 2024. The increase in revenues for the year ended December 31, 2025 was attributable to increased earning asset yields, a decrease in interest expense on deposits, and higher gains from loan sales.
Net interest income for the year ended December 31, 2025 was $98.9 million, an increase of $15.7 million compared to the year ended December 31, 2024. Our net interest margin increased 46 basis points to 3.16% for the year ended December 31, 2025 compared to the year ended December 31, 2024. The increase in the net interest margin was due to an increase in yields on loans and a decrease in funding costs.
Results of Operations
Net Interest Income
Net interest income is the difference between interest earned on loans and securities and interest paid on deposits and other borrowings, and is the primary source of our operating income. Net interest income is affected by the level of interest rates, changes in interest rates and changes in the amount and composition of interest-earning assets and interest-bearing liabilities. Included in interest income are certain loan fees, such as deferred origination fees and late charges. We convert tax-exempt income to a Fully Taxed Equivalent (FTE) basis using the statutory federal income tax rate adjusted for applicable state income taxes net of the related federal tax benefit. The average balances are principally daily averages. Interest income on loans includes the effect of deferred loan fees and costs accounted for as yield adjustments. Premium amortization and discount accretion are included in the respective interest income and interest expense amounts.
FTE netinterest income for the years ended December 31, 2025 and 2024 was $99.5 million and $83.7 million, respectively. FTE net interest income increased due to a decrease in interest expense and an increase in interest income attributable to higher loan yields.
FTE basis interest income for the year ended December 31, 2025 increased $6.5 million, or 3.37%, to $198.9 million compared to FTE basis interest income for the year ended December 31, 2024, due primarily to an increase in commercial real estate loans. Average interest earning assets were $3.1 billion for the year ended December 31, 2025, increasing by $40.4 million, or 1.30%, from the year ended December 31, 2024.
Distribution of Assets, Liabilities and Stockholders' Equity; Interest Rates and Interest Differential
The following table presents the average balances and yields earned on interest-earning assets and average balances and weighted average rates paid on our funding liabilities for the years ended December 31, 2025 and 2024.
Years Ended December 31,
2025 2024
Average
Balance 		Interest
Yield/
Rate(4)
Average
Balance 		Interest
Yield/
Rate(4)
(Dollars in thousands)
Assets:
Cash and fed funds sold $ 288,987 $ 11,490 3.98 % $ 283,353 $ 13,970 4.93 %
Securities(1)
157,033 6,309 4.02 142,744 5,098 3.57
Loans:
Commercial real estate 1,849,502 115,827 6.18 1,905,973 112,804 5.82
Residential real estate 36,788 2,223 6.04 47,767 2,978 6.23
Construction 182,440 14,322 7.74 162,180 12,197 7.40
Commercial business 554,862 44,205 7.86 514,800 42,006 8.03
Consumer 70,186 4,093 5.83 41,869 2,847 6.80
Total loans 2,693,778 180,670 6.62 2,672,589 172,832 6.36
Federal Home Loan Bank stock 5,000 397 7.95 5,666 477 8.41
Total earning assets 3,144,798 $ 198,866 6.24 % 3,104,352 $ 192,377 6.09 %
Other assets 92,684 92,885
Total assets $ 3,237,482 $ 3,197,237
Liabilities and shareholders' equity:
Interest bearing liabilities:
NOW $ 100,341 $ 374 0.37 % $ 96,091 $ 175 0.18 %
Money market 908,304 34,149 3.76 851,283 34,767 4.08
Savings 92,637 2,728 2.95 90,587 2,785 3.07
Time 1,291,785 55,577 4.30 1,335,680 63,531 4.76
Total interest bearing deposits 2,393,067 92,828 3.88 2,373,641 101,258 4.27
Borrowed money 138,305 6,564 4.75 159,320 7,454 4.68
Total interest bearing liabilities 2,531,372 $ 99,392 3.93 % 2,532,961 $ 108,712 4.29 %
Noninterest bearing deposits 368,777 332,611
Other liabilities 51,722 60,464
Total liabilities 2,951,871 2,926,036
Shareholders' equity 285,611 271,201
Total liabilities and shareholders' equity $ 3,237,482 $ 3,197,237
Net interest income(2)
$ 99,474 $ 83,665
Interest rate spread 2.31 % 1.80 %
Net interest margin(3)
3.16 % 2.70 %
(1)Average balances and yields for securities are based on amortized cost.
(2)The adjustment for securities and loans taxable equivalency was $539 thousand and $383 thousand, respectively, for the years ended December 31, 2025 and 2024. Tax exempt income was converted to a fully taxable equivalent basis at a 20 percent tax rate for 2025 and 2024.
(3)Net interest income as a percentage of total earning assets.
(4)Yields are calculated using the contractual day count convention for each respective product type.
Effect of changes in interest rates and volume of average earning assets and average interest-bearing liabilities
The following table shows the extent to which changes in interest rates and changes in the volume of average earning assets and average interest-bearing liabilities have affected net interest income. For each category of earning assets and interest-bearing liabilities, information is provided relating to: changes in volume (changes in average balances multiplied by the prior year's average interest rates); changes in rates (changes in average interest rates multiplied by the prior year's average balances); and the total change. Changes attributable to both volume and rate have been allocated proportionately based on the relationship of the absolute dollar amount of change in each.
Year Ended
December 31, 2025 vs 2024
Increase (Decrease)
Volume Rate Total
(In thousands)
Interest and dividend income:
Cash and fed funds sold $ 273 $ (2,754) $ (2,481)
Securities 539 672 1,211
Loans:
Commercial real estate (3,409) 6,432 3,023
Residential real estate (666) (88) (754)
Construction 1,574 551 2,125
Commercial business 3,216 (1,017) 2,199
Consumer 1,708 (463) 1,245
Total loans 2,423 5,415 7,838
Federal Home Loan Bank stock (54) (25) (79)
Total change in interest and dividend income $ 3,181 $ 3,308 $ 6,489
Interest expense:
Deposits:
NOW $ 8 $ 191 $ 199
Money market 2,252 (2,870) (618)
Savings 62 (119) (57)
Time (2,043) (5,911) (7,954)
Total deposits 279 (8,709) (8,430)
Borrowed money (1,014) 124 (890)
Total change in interest expense (735) (8,585) (9,320)
Change in net interest income $ 3,916 $ 11,893 $ 15,809
Provision for Credit Losses
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.
The provision for credit losses for the year ended December 31, 2025 was $1.0 million compared to a $22.6 million provision for credit losses for the year ended December 31, 2024. The decrease in the provision for credit losses during the year was primarily due to net charge offs taken during the year ended December 31, 2024.
Noninterest Income
Noninterest income is a component of our revenue and is comprised primarily of fees generated from loan and deposit relationships with our clients, fees generated from sales and referrals of loans, income earned on bank owned life insurance and gains on sales of investment securities. The following table compares noninterest income for the years ended December 31, 2025 and 2024.
Years Ended
December 31,
Change
2025 2024 $ %
(Dollars in thousands)
Gains and fees from sales of loans $ 5,078 $ 523 $ 4,555 Favorable
Bank owned life insurance 1,416 1,356 60 4.4
Service charges and fees 2,826 1,963 863 44.0
Other 68 (124) 192 Favorable
Total noninterest income $ 9,388 $ 3,718 $ 5,670 Favorable
Noninterest income increased by $5.7 million to $9.4 million for the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase for the year ended December 31, 2025 was mainly driven by higher gains from SBA loan sales.
Noninterest Expense
The following table compares noninterest expense for the years ended December 31, 2025 and 2024.
Years Ended
December 31,
Change
2025 2024 $ %
(Dollars in thousands)
Salaries and employee benefits $ 30,285 $ 23,746 $ 6,539 27.5 %
Occupancy and equipment 10,124 9,494 630 6.6
Data processing 3,107 3,251 (144) (4.4)
Professional services 5,988 4,482 1,506 33.6
Director fees 1,351 1,840 (489) (26.6)
FDIC insurance 2,685 3,350 (665) (19.9)
Marketing 608 452 156 34.5
Other 4,640 4,436 204 4.6
Total noninterest expense $ 58,788 $ 51,051 $ 7,737 15.2 %
Noninterest expense increased by $7.7 million, or 15.2%, to $58.8 million for the year ended December 31, 2025 compared to the year ended December 31, 2024. The increase in noninterest expense was primarily attributable to an increase in salaries and employee benefits resulting from incremental new hires in support of strategic initiatives. Additionally, professional services increased, reflecting higher recruiting costs aligned with these initiatives.
Income Taxes
Income tax expense for the years ended December 31, 2025 and 2024 totaled $13.3 million and $3.6 million, respectively. The effective tax rates for the years ended December 31, 2025 and 2024, were 27.4% and 26.7%, respectively.
Our net deferred tax assets at December 31, 2025 was $11.4 million, compared to $9.7 million at December 31, 2024.
On October 8, 2015, the Bank established a wholly-owned subsidiary, Bankwell Loan Servicing Group, Inc., which serves as a Passive Investment Company ("PIC"). The PIC is organized in accordance with Connecticut statutes to hold and manage certain loans that are collateralized by real estate. Income earned by the PIC is exempt from Connecticut income tax and any dividends paid by the PIC to the Bank are not taxable income for Connecticut income tax purposes.
Financial Condition
Summary
Assets totaled $3.4 billion at December 31, 2025, compared to assets of $3.3 billion at December 31, 2024. Gross loans totaled $2.8 billion at December 31, 2025, compared to gross loans of $2.7 billion at December 31, 2024. Deposits totaled $2.8 billion at December 31, 2025, compared to deposits of $2.8 billion at December 31, 2024.
Shareholders' equity totaled $301.5 million as of December 31, 2025, an increase of $31.0 million compared to December 31, 2024, primarily a result of net income of $35.2 million for the year ended December 31, 2025. The increase was partially offset by dividends paid of $6.3 million.
Loan Portfolio
We originate commercial real estate loans, construction loans, commercial business loans and consumer loans in our market. We also pursue certain types of commercial lending opportunities outside our market, particularly where we have strong business relationships. Our loan portfolio is the largest category of our earnings assets.
The following table compares the composition of our loan portfolio for the dates indicated:
2025 2024 Change
Total % Total % Total
(Dollars in thousands)
Real estate loans:
Residential $ 33,139 1.17 % $ 42,766 1.58 % $ (9,627)
Commercial 1,930,979 67.99 1,899,134 70.19 31,845
Construction 153,778 5.41 173,555 6.41 (19,777)
2,117,896 74.57 2,115,455 78.18 2,441
Commercial business 645,321 22.72 515,125 19.04 130,196
Consumer 76,855 2.71 75,308 2.78 1,547
Total loans $ 2,840,072 100.00 % $ 2,705,888 100.00 % $ 134,184
Primary loan categories
Residential real estate. Residential real estate loans decreased by $9.6 million, or 22.5%, at December 31, 2025 compared to December 31, 2024 and amounted to $33.1 million, representing 1.2% of total loans at December 31, 2025. The Bank ceased originating residential mortgage loans in 2017.
Commercial real estate.Commercial real estate loans were $1.9 billion and represented 68.0% of our total loan portfolio at December 31, 2025, an increase of $31.8 million, or 1.7%, from December 31, 2024. 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.
The following table compares the composition of our commercial real estate loan portfolio by non-owner occupied and owner occupied loans at December 31, 2025 and December 31, 2024:
2025 2024 Change
Total % Total % Total
(Dollars in thousands)
Commercial real estate loans:
Non-owner occupied $ 1,128,993 58.47 % $ 1,174,712 61.86 % $ (45,719)
Owner occupied 801,851 41.53 724,203 38.14 77,648
Total commercial real estate loans(1)
$ 1,930,844 100.00 % $ 1,898,915 100.00 % $ 31,929
(1) Excludes the positive fair value effect of the portfolio layer swap of $135 thousand and $219 thousand for Commercial Real Estate at December 31, 2025 and 2024, respectively.
Construction.Construction loans were $153.8 million at December 31 2025, a decrease of $19.8 million, or 11.4%, from December 31, 2024. 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.
Commercial business.Commercial business loans were $645.3 million and represented 22.7% of our total loan portfolio at December 31, 2025, an increase of $130.2 million, or 25.3%, from December 31, 2024. 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.
Consumer loans. Consumer loans were $76.9 million and represented 2.7% of our total loan portfolio as of December 31, 2025, an increase of $1.5 million, or 2.1%.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.
The following table compares the composition of our commercial real estate loan portfolio by property type, and collateral location as of December 31, 2025:
Commercial Real Estate CT All Other NY NYC NJ FL OH PA All Other
Total(1)
(Dollars in thousands)
Residential care(2)
$ 8,650 $ 48,404 $ 57,534 $ 8,800 $ 257,220 $ 98,205 $ 44,332 $ 272,021 $ 795,166
Retail 78,625 72,057 7,233 13,060 2,164 3,323 33,114 87,374 296,950
Multifamily 167,155 22,445 49,816 7,021 - - 21,322 - 267,759
Office 55,487 10,030 8,394 28,909 2,173 - - 58,009 163,002
Industrial / warehouse 63,432 19,166 18,722 16,753 2,633 - - 10,764 131,470
Mixed use 48,847 20,319 43,270 - - - - - 112,436
Medical office 27,447 11,998 1,352 - - 4,675 3,900 20,819 70,191
1-4 family investment 10,921 1,580 1,833 2,088 16,888 - - - 33,310
All other(3)
11,572 26,286 22,702 - - - - - 60,560
$ 472,136 $ 232,285 $ 210,856 $ 76,631 $ 281,078 $ 106,203 $ 102,668 $ 448,987 $ 1,930,844
(1) Excludes the positive fair value effect of the portfolio layer swap of $135 thousand for Commercial Real Estate at December 31, 2025.
(2) Primarily consists of skilled nursing and assisted living facilities.
(3) Includes Special use, self storage, and land.
As of December 31, 2025, the Bank had $163.0 million of loans collateralized by offices, which represented 8.4% of the total loan portfolio. Most of the properties in this portfolio are in suburban locations. 91.0% of this portfolio was pass rated, and there was one relationship totaling $5.3 million on nonaccrual status.
As of December 31, 2025, we had $267.8 million of loans collateralized by multifamily properties, which represented 9.4% of the total loan portfolio. 78.2% of the portfolio is pass rated and current; these properties are all located in Connecticut, New York, New Jersey, or Pennsylvania, with the majority in suburban locations, with eight properties totaling $49.8 million located in New York City. 78.3% of the New York City exposure is located in Brooklyn, 11.9% in Manhattan, and the remaining 9.8% in Queens.
The following table presents an analysis of the commercial real estate portfolio's loan to value at origination and by property type as of December 31, 2025.
Commercial Real Estate
Total CRE Portfolio(1)
Percentage of Total CRE Portfolio Loan to Value at Origination %
(Dollars in thousands)
Property Type
Residential care(2)
$ 795,166 41.2 % 65.4 %
Retail 296,950 15.4 63.3
Multifamily 267,759 13.9 62.5
Office 163,002 8.4 64.0
Industrial / warehouse 131,470 6.8 64.1
Mixed use 112,436 5.8 57.9
Medical office 70,191 3.6 61.3
1-4 family investment 33,310 1.7 61.1
All other 60,560 3.1 51.4
Total $ 1,930,844 100.0 % 63.4 %
(1) Excludes the positive fair value effect of the portfolio layer swap of $135 thousand for Commercial Real Estate at December 31, 2025.
(2) Primarily consists of skilled nursing and assisted living facilities.
The following table presents an analysis of the maturity of our commercial real estate, commercial construction and commercial business loan portfolios as of December 31, 2025.
December 31, 2025
Commercial
Real Estate(1)
Commercial
Construction
Commercial
Business(1)
Total
(In thousands)
Amounts due:
One year or less $ 711,704 $ 87,579 $ 222,034 $ 1,021,317
After one year:
One to five years 981,990 60,344 268,599 1,310,933
Over five years 237,150 5,855 154,668 397,673
Total due after one year 1,219,140 66,199 423,267 1,708,606
Total $ 1,930,844 $ 153,778 $ 645,301 $ 2,729,923
(1) Excludes the positive fair value effect of the portfolio layer swap of $135 thousand for Commercial Real Estate and $20 thousand for Commercial Business.
The following table presents an analysis of the interest rate sensitivity of our commercial real estate, commercial construction and commercial business loan portfolios due after one year as of December 31, 2025.
December 31, 2025
Adjustable
Interest Rate 		Fixed Interest
Rate 		Total
(In thousands)
Commercial real estate $ 397,731 $ 821,409 $ 1,219,140
Commercial construction 55,027 11,172 66,199
Commercial business 271,246 152,021 423,267
Total loans due after one year $ 724,004 $ 984,602 $ 1,708,606
Asset Quality
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.
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, depending on the borrower's creditworthiness and the type of collateral. The borrower'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, time 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 borrower's ability to generate continuing cash flows. Management discontinued residential mortgage loan originations in 2017 and ceased offering home equity loans and lines of credit in 2019. The Company's policy for residential lending generally required that the amount of the loan may not exceed 80% of the original appraised value of the property. In certain situations, the amount may have exceeded 80% LTV either with private mortgage insurance being required for that portion of the residential loan in excess of 80% of the appraised value of the property or where secondary financing is provided by a housing authority program second mortgage, a community's low/moderate income housing program, or a religious or civic organization.
Credit quality indicators. The Company measures credit risk within its loan portfolios through the use of a credit risk rating system. The risk rating reflects management's assessment of a loan's overall risk, considering the character and creditworthiness of the borrower and any guarantor, the borrower's capacity to service the debt, the availability of credit enhancements or other sources of repayment, and the quality, value, and coverage of collateral, if applicable. The following table presents credit risk ratings as of December 31, 2025, and December 31, 2024:
Credit Risk Ratings
At December 31,
2025 2024
(Dollars in thousands)
Pass $ 2,711,179 $ 2,557,136
Special Mention(1)
80,429 93,214
Substandard 48,464 54,083
Doubtful - 1,455
Loss - -
Total loans $ 2,840,072 $ 2,705,888
(1) 100.0% and 99.6% of Risk Rated 6 loans are current on payments, 99.3% and 93.0% are guaranteed by ultra-high net worth sponsors as of December 31, 2025 and December 31, 2024, respectively.
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.
Acquired Loans. Loans acquired in acquisitions are initially recorded at fair value with no carryover of the related allowance for credit losses. Acquired loans that have evidence of deterioration in credit quality since origination and for which it is probable, at acquisition, that all contractually required payments will not be collected are initially recorded at fair value without recording an ACL-Loans. The fair value of the loans is determined by using market participant assumptions to estimate the amount and timing of principal and interest cash flows initially expected to be collected on the loans and discounting those cash flows at an appropriate market rate of interest.
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.
Nonperforming Assets. Nonperforming assets include nonaccrual loans and property acquired through foreclosures or repossession. The following table presents nonperforming assets and additional asset quality data for the dates indicated:
At December 31,
2025 2024
(Dollars in thousands)
Nonaccrual loans:
Real estate loans:
Residential $ 557 $ 791
Commercial 14,445 44,814
Commercial business 1,302 7,672
Construction - -
Total nonaccrual loans 16,304 53,277
Property acquired through foreclosure or repossession, net - $ 8,299
Total nonperforming assets $ 16,304 $ 61,576
Nonperforming assets to total assets 0.49 % 1.88 %
Nonperforming loans to total loans 0.57 % 1.97 %
Total nonaccrual loans were $16.3 million as of December 31, 2025. Nonperforming assets as a percentage of total assets was 0.49% at December 31, 2025, when compared to 1.88% at December 31, 2024. The ACL-Loans at December 31, 2025 was $30.7 million, representing 1.08% of total loans.
Nonaccrual Loans. Loans greater than 90 days past due are generally put on nonaccrual status. Loans are also placed on nonaccrual status when, in the opinion of management, full collection of principal and interest is doubtful. Interest previously accrued, but uncollected, is reversed against current period income. Subsequent payments are recognized on a cash basis or principal recapture basis depending on a number of factors including probability of collection and if a credit loss is identified. 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. At December 31, 2025 and 2024, there were no commitments to lend additional funds to any borrower on nonaccrual status.
Past Due Loans. 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 table presents past due loans as of December 31, 2025 and 2024:
30-59 Days Past Due 60-89 Days Past Due 90 Days or Greater Past Due Total Past Due
(In thousands)
As of December 31, 2025
Residential real estate $ 557 $ - $ - $ 557
Commercial real estate 56 - 5,901 5,957
Construction - - - -
Commercial business 1,106 17 1,273 2,396
Consumer 5 - - 5
Total loans $ 1,724 $ 17 $ 7,174 $ 8,915
As of December 31, 2024
Residential real estate $ 130 $ 226 $ 652 $ 1,008
Commercial real estate 359 - 35,585 35,944
Construction - - - -
Commercial business 4 11 7,143 7,158
Consumer - - - -
Total loans $ 493 $ 237 $ 43,380 $ 44,110
Total past due loans totaled $8.9 million and represented 0.31% of total loans as of December 31, 2025, decreasing $35.2 million from December 31, 2024.
Modifications. Loans are considered modified when the borrower is experiencing financial difficulties and the Bank has granted concessions to a borrower due to the borrower's financial condition that we otherwise would not have considered. These concessions may include modifications of the terms of the debt such as reduction of the stated interest rate other than normal market rate adjustments, extension of maturity dates, or reduction of principal balance or accrued interest. The decision to modify a loan, rather than aggressively enforcing the collection of the loan, may benefit us by increasing the ultimate probability of collection.
Modified 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 modifying generally remain on nonaccrual status for approximately six months before management considers such loans for return to accruing status. Accruing modified loans are placed into nonaccrual status if and when the borrower fails to comply with the modified 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, 2025 and 2024.
The following table presents information on modified loans:
At December 31,
2025 2024
(In thousands)
Accruing modified loans:
Residential real estate $ 2,193 $ 2,261
Commercial real estate - -
Commercial business 293 -
Accruing modified loans 2,486 2,261
Nonaccrual modified loans:
Residential real estate $ 558 $ 652
Commercial real estate 8,543 9,217
Commercial business - 54
Nonaccrual modified loans 9,101 9,923
Total modified loans $ 11,587 $ 12,184
As of December 31, 2025 and 2024, loans classified as modified totaled $11.6 million and $12.2 million, respectively.
Potential Problem Loans. We classify certain loans as "special mention", "substandard", or "doubtful", based on criteria consistent with guidelines provided by our banking regulators. Potential problem loans represent loans that are currently performing, but for which known information about possible credit problems of the related borrowers causes management to have doubts as to the ability of such borrowers to comply with the present loan repayment terms and which may result in disclosure of such loans as nonperforming at some time in the future. We cannot predict the extent to which economic conditions or other factors may impact borrowers and the potential problem loans. Accordingly, there can be no assurance that other loans will not become 90 days or more past due, be placed on nonaccrual, become modified, or require increased allowance coverage and provision for credit losses. Potential problem loans are assessed for loss exposure using the methods described in Note 5 to our Consolidated Financial Statements under the caption "Credit Quality Indicators".
We expect the levels of nonperforming assets and potential problem loans to fluctuate in response to changing economic and market conditions, and the relative sizes of the respective loan portfolios, along with our degree of success in resolving problem assets. We take a proactive approach with respect to the identification and resolution of problem loans.
Allowance for Credit Losses - Loans ("ACL-Loans")
Our Board of Directors has adopted an Allowance for Credit Losses policy designed to provide management with a methodology for determining and documenting the allowance for credit losses for each reporting period. We evaluate the adequacy of the ACL-Loans at least quarterly, and in determining our ACL-Loans, we estimate losses on specific loans, or groups of loans, where the probable loss can be identified and reasonably determined. The balance of our ACL-Loans is based on internally assigned risk classifications of loans, the Bank's and peer banks' historical loss experience, changes in the nature of the loan portfolio, overall portfolio quality, industry concentrations, delinquency trends, current economic factors and the estimated impact of current economic conditions on certain historical loan loss rates. See additional discussion regarding our Allowance for Credit Losses-Loans ("ACL-Loans") and Allowance for Credit Losses-Unfunded commitments ("ACL-Unfunded commitments") under the caption "Critical Accounting Policies and Estimates."
Our general practice is to identify problem credits early and recognize full or partial charge-offs as promptly as practicable when it is determined that it is probable that the loan will not be repaid according to its original contractual terms, including principal and interest. Full or partial charge-offs on collateral dependent loans are recognized when the collateral is deemed to be insufficient to support the carrying value of the loan. We do not recognize a recovery when an updated appraisal indicates a subsequent increase in value of the collateral.
Our charge-off policies, which comply with standards established by our banking regulators, are consistently applied from period to period. Charge-offs are recorded on a monthly basis, as incurred. Partially charged-off loans continue to be evaluated on a monthly basis and additional charge-offs or loan loss provisions may be recorded on the remaining loan balance based on the same criteria.
The following table presents the activity in our ACL-Loans and related ratios for the dates indicated:
At December 31,
2025 2024
(Dollars in thousands)
Balance at beginning of period $ 29,007 $ 27,946
Charge-offs:
Residential real estate - (141)
Commercial real estate (67) (13,111)
Construction - (1,771)
Commercial business (29) (7,909)
Consumer (84) (84)
Total charge-offs (180) (23,016)
Recoveries:
Residential real estate - 141
Commercial real estate 279 1,126
Commercial business 231 (3)
Consumer 60 23
Total recoveries 570 1,287
Net (charge-offs) recoveries 390 (21,729)
Provision charged to earnings 1,308 22,790
Balance at end of period $ 30,705 $ 29,007
Net (recoveries) or charge-offs to average loans (0.01) % 0.81 %
ACL-Loans to total loans
1.08 % 1.07 %
At December 31, 2025, our ACL-Loans was $30.7 million and represented 1.08% of total loans, compared to $29.0 million, or 1.07% of total loans at December 31, 2024.
The carrying amount of total individually evaluated loans at December 31, 2025 was $78.9 million. This compares to a carrying amount of $113.9 million for total individually evaluated loans at December 31, 2024.
The following table presents the allocation of the ACL-Loans, the ACL-Loans percentage, and the related loan segments to total loans percentage:
At December 31,
2025 2024
ACL-Loans Amount ACL-Loans Percentage Loan Segment to Total Loans Percentage ACL-Loans Amount ACL-Loans Percentage Loan Segment to Total Loans Percentage
(Dollars in thousands)
Residential real estate $ 55 0.18 % 1.17 % $ 94 0.32 % 1.58 %
Commercial real estate 20,255 65.97 67.99 21,838 75.29 70.19
Construction 2,251 7.33 5.41 2,059 7.10 6.41
Commercial business 6,635 21.61 22.72 4,070 14.03 19.04
Consumer 1,509 4.91 2.71 946 3.26 2.78
Total
$ 30,705 100.00 % 100.00 % $ 29,007 100.00 % 100.00 %
The allocation of the ACL-Loans at December 31, 2025 reflects our assessment of credit risk and probable loss within each portfolio. We believe that the level of the ACL-Loans at December 31, 2025 is appropriate to cover probable losses.
Investment Securities
We manage our investment securities portfolio to provide a readily available source of liquidity for balance sheet management, to generate interest income and to implement interest rate risk management strategies. Investments are designated as either marketable equity, available for sale, held to maturity or trading securities at the time of purchase. We do not currently maintain a portfolio of trading securities. Investment securities available for sale may be sold in response to changes in market conditions, prepayment risk, rate fluctuations, liquidity, or capital requirements. Investment securities available for sale are reported at fair value, with any unrealized gains and losses excluded from earnings and reported as a separate component of shareholders' equity, net of tax, until realized. Investment securities held to maturity are reported at amortized cost. Marketable equity securities are reported at fair value, with any changes in fair value recognized in earnings.
The amortized cost and fair value of investment securities as of the dates indicated are presented in the following table:
At December 31,
2025 2024
Amortized
Cost 		Fair
Value 		Amortized
Cost 		Fair
Value
(In thousands)
Marketable equity securities $ 2,334 $ 2,248 $ 2,264 $ 2,118
Securities available for sale:
U.S. Government and agency obligations 151,730 149,924 95,443 91,582
Corporate bonds 11,000 10,485 17,000 15,846
Total securities available for sale $ 162,730 $ 160,409 $ 112,443 $ 107,428
Securities held to maturity:
State agency and municipal obligations 29,465 31,045 36,525 36,662
Government mortgage-backed securities - - 28 29
Total securities held to maturity $ 29,465 $ 31,045 $ 36,553 $ 36,691
At December 31, 2025, the carrying value of our investment securities portfolio totaled $192.1 million and represented 6% of total assets, compared to $146.1 million and 4% of total assets at December 31, 2024. The increase of $46.0 million primarily reflects purchases of available for sale securities. We purchase investment grade securities with a focus on liquidity, earnings and duration exposure.
The net unrealized losses on our investment portfolio at December 31, 2025 was $0.7 million and included $2.0 million of gross unrealized gains. The net unrealized loss position on our investment portfolio at December 31, 2024 was $4.9 million and included $1.3 million of gross unrealized gains.
The following tables summarize the amortized cost and weighted average yield of securities in our investment securities portfolio as of December 31, 2025 and 2024, based on remaining period to contractual maturity. Information for mortgage-backed securities is based on the final contractual maturity dates without considering repayments and prepayments.
Due Within 1 Year Due 1-5 Years Due 5-10 Years Due After 10 Years or No Contractual Maturity
At December 31, 2025 Amortized
Cost 		Yield Amortized
Cost 		Yield Amortized
Cost 		Yield Amortized
Cost 		Yield
(Dollars in thousands)
Marketable equity securities $ - - % $ - - % $ - - % $ 2,334 2.19 %
Securities available for sale:
U.S. Government and agency obligations 35,088 1.94 97,864 3.64 17,024 2.29 1,754 3.55
Corporate bonds - - 4,000 7.81 7,000 3.88 - -
Total securities available for sale $ 35,088 1.94 % $ 101,864 3.81 % $ 24,024 2.75 % $ 1,754 3.55 %
Securities held to maturity:
State agency and municipal obligations $ - - % $ - - % $ 2,764 4.73 % $ 26,701 6.08 %
Government mortgage-backed securities - - - - - - - -
Total securities held to maturity $ - - % $ - - % $ 2,764 4.73 % $ 26,701 6.08 %
Due Within 1 Year Due 1-5 Years Due 5-10 Years Due After 10 Years or No Contractual Maturity
At December 31, 2024 Amortized
Cost 		Yield Amortized
Cost 		Yield Amortized
Cost 		Yield Amortized
Cost 		Yield
(Dollars in thousands)
Marketable equity securities $ - - % $ - - % $ - - % $ 2,264 2.19 %
Securities available for sale:
U.S. Government and agency obligations 24,920 3.39 47,541 2.03 16,038 2.53 6,944 2.10
Corporate bonds - - - - 15,500 4.18 1,500 4.50
Total securities available for sale $ 24,920 3.39 % $ 47,541 2.03 % $ 31,538 3.34 % $ 8,444 2.53 %
Securities held to maturity:
State agency and municipal obligations $ 6,820 7.08 % $ - - % $ 2,808 4.73 % $ 26,897 6.07 %
Government mortgage-backed securities - - - - - - 28 5.46
Total securities held to maturity $ 6,820 7.08 % $ - - % $ 2,808 4.73 % $ 26,925 6.07 %
Bank Owned Life Insurance ("BOLI")
BOLI amounted to $54.2 million as of December 31, 2025. The purchase of life insurance policies results in an income-earning asset on our consolidated balance sheet that provides monthly tax-free income to us. We expect to benefit from the BOLI contracts as a result of the tax-free growth in cash surrender value and death benefits that are expected to be generated over time. BOLI is included in our Consolidated Balance Sheets at its cash surrender value. Increases in the cash surrender value are reported as a component of noninterest income in our Consolidated Statements of Income.
Deposit Activities and Other Sources of Funds
Our sources of funds include deposits, including brokered deposits, FHLB borrowings, subordinated debt and proceeds from the sales, maturities and payments of loans and investment securities.
Total deposits represented 84% of our total assets at December 31, 2025. While scheduled loan and securities repayments are relatively stable sources of funds, loan and securities prepayments and deposit inflows are influenced by prevailing interest rates and local economic conditions and are inherently uncertain.
Deposits
We offer a wide variety of deposit products and rates to consumer and business clients consistent with FDIC regulations. Our executive management team meets regularly to determine pricing and marketing initiatives. In addition to being an important source of funding for us, deposits also provide an ongoing stream of fee revenue.
We participate in the Certificate of Deposit Account Registry Service ("CDARS") and Insured Cash Sweep Service ("ICS") programs. We use CDARS and ICS to place client funds into certificate of deposit accounts and money market accounts, respectively, into other participating banks. These transactions occur in amounts that are less than FDIC insurance limits to ensure that deposit clients are eligible for FDIC insurance on the full amount of their deposits. Reciprocal amounts of deposits are received from other participating banks that do the same with their client deposits, and we also execute one-way buy transactions. CDARS one-way and ICS one-way buy transactions are considered to be brokered deposits for bank regulatory purposes.
Time deposits may also be generated through the use of listing services. We utilize both consumer-facing listing platforms, which allow depositors to view our advertised time-deposit rates and open a time certificate of deposit via Bankwell Direct, as well as listing services used by financial institutions. Interested financial institutions will contact us directly to acquire a time certificate of deposit. There is no third party brokerage service involved in these transactions.
The following table sets forth the composition of our deposits for the dates indicated:
At December 31,
2025 2024
Amount Percent Weighted
Average
Rate 		Amount Percent Weighted
Average
Rate
(Dollars in thousands)
Noninterest-bearing demand $ 403,652 14.27 % - % $ 321,875 11.54 % - %
NOW 90,205 3.19 0.37 105,090 3.77 0.18
Money market 1,007,844 35.62 3.76 899,413 32.27 4.08
Savings 97,418 3.44 2.95 90,220 3.24 3.07
Time 1,230,362 43.48 4.30 1,370,972 49.18 4.76
Total deposits $ 2,829,481 100.00 % 3.88 % $ 2,787,570 100.00 % 4.27 %
Total deposits were $2.8 billion at December 31, 2025, an increase of $41.9 million, or 1.5%, from December 31, 2024.
Brokered certificates of deposits ("Brokered CDs") totaled $505.0 million and $651.5 million at December 31, 2025 and December 31, 2024, respectively. Brokered money market accounts totaled $53.7 million and $53.5 million at December 31, 2025 and 2024, respectively. Certificates of deposits from national listing services were $42.3 million and $109.1 million as of December 31, 2025 and December 31, 2024, respectively. There were no certificates of deposits from one-way buy CDARS or one-way buy ICS at December 31, 2025 or December 31, 2024. Brokered deposits are comprised of Brokered CDs, brokered money market accounts, one-way buy CDARS, and one-way buy ICS.
As of December 31, 2025, our FDIC insured deposits were $1.9 billion, or 68% of total deposits. Additionally, $78.6 million of deposits are insured by standby letters of credit with the Federal Home Loan Bank of Boston, or 3% of total deposits.
At December 31, 2025and 2024, time deposits, including CDARS and Brokered CDs, with a denomination of $100 thousand or more totaled $1.1 billionand $1.2 billion, respectively, maturing during the periods indicated in the table below:
At December 31,
2025 2024
(In thousands)
Maturing:
Within 3 months $ 318,803 $ 421,808
After 3 but within 6 months 352,251 326,115
After 6 months but within 1 year 379,021 419,098
After 1 year 3,265 19,429
Total $ 1,053,340 $ 1,186,450
Federal Home Loan Bank Advances and Other Borrowings
The Bank is a member of the FHLB, which is part of the Federal Home Loan Bank System. Members are required to own capital stock of the FHLB, and borrowings are collateralized by qualifying assets not otherwise pledged. The maximum amount of credit that the FHLB will extend varies from time to time, depending on its policies and the amount of qualifying collateral the member can pledge. The Bank had satisfied its collateral requirement at December 31, 2025.
We utilize advances from the FHLB as part of our overall funding strategy, to meet short-term liquidity needs and to manage interest rate risk arising from the difference in asset and liability maturities. Total FHLB advances were $110.0 million at December 31, 2025 and $90.0 million at December 31, 2024.
The Bank has additional borrowing capacity at the FHLB up to a certain percentage of the value of qualified collateral. In accordance with agreements with the FHLB, the qualified collateral must be free and clear of liens, pledges and encumbrances. At December 31, 2025, the Bank had pledged $847.6 million of eligible loans and investment securities as collateral to support borrowing capacity at the FHLB of Boston. As of December 31, 2025, the Bank had immediate availability to borrow an additional $426.0 million based on qualified collateral.
Advances from the FHLB include short-term advances with original maturity dates of one year or less. The following table sets forth certain information concerning short-term FHLB advances as of and for the periods indicated:
Year Ended December 31,
2025 2024
(Dollars in thousands)
Average amount outstanding during the period $ 72,083 $ 90,000
Amount outstanding at end of period 110,000 90,000
Highest month end balance during the period 150,000 90,000
Weighted average interest rate at end of period 4.42 % 3.91 %
On October 14, 2021, the Company completed a private placement of a $35.0 million fixed-to-floating rate subordinated note (the "2021 Note") to an institutional accredited investor. The Company used the net proceeds to repay the outstanding balance of subordinated debt issued in 2015 and for general corporate purposes.
The 2021 Note bears interest at a fixed rate of 3.25% per year until October 14, 2026. Thereafter, the interest rate will reset quarterly at a variable rate equal to the then current three-month term SOFR plus 233 basis points. The 2021 Note has a stated maturity of October 15, 2031 and is non-callable for five years. Beginning October 15, 2026, the Company may redeem the 2021 Note, in whole or in part, at its option. The 2021 Note is not redeemable at the option of the holder. The 2021 Note has been structured to qualify for the Company as Tier 2 capital under regulatory guidelines.
On August 19, 2022, the Company entered into a Subordinated Note Purchase Agreement with certain qualified institutional buyers, pursuant to which the Company issued and sold 6.0% fixed-to-floating rate subordinated notes due 2032 (the "2022 Notes") in the aggregate principal amount of $35.0 million. The Company used the net proceeds from the sale of the 2022 Notes for general corporate purposes.
The 2022 Notes bear interest at a fixed rate of 6.0% per year until August 31, 2027. Thereafter, the interest rate will reset quarterly at a variable rate equal to the then current three-month term SOFR plus 326 basis points. The 2022 Notes have a stated maturity of September 1, 2032 and are non-callable for five years. Beginning August 19, 2027, the Company may redeem the 2022 Notes, in whole or in part, at its option. The 2022 Notes are not subject to redemption at the option of the holder. The 2022 Notes have been structured to qualify for the Company as Tier 2 capital under regulatory guidelines.
Derivative Instruments
The Company uses interest rate swap instruments to fix the interest rate on short-term FHLB borrowings or brokered deposits, all of which are designated as cash flow hedges. The hedge strategy converts the rate of interest on short-term rolling FHLB advances or brokered deposits to long-term fixed interest rates, thereby protecting the Bank from interest rate variability in the contractually specified interest rates.
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.
Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain loan clients. The Company executes interest rate swaps with commercial banking clients to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting derivatives that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the client derivatives and the offsetting derivatives are recognized directly in earnings. Information about derivative instruments at December 31, 2025 and 2024 was as follows:
As of December 31, 2025
Derivative Assets Derivative Liabilities
Original Notional Amount Balance Sheet Location Fair Value Original Notional Amount Balance Sheet Location Fair Value
(In thousands)
Derivatives designated as hedging instruments:
Interest rate swap $ 25,000 Other assets $ 1,925 $ - Accrued expenses and other liabilities $ -
Fair value swap $ - Other assets $ - $ 150,000 Accrued expenses and other liabilities $ 156
Derivatives not designated as hedging instruments:
Interest rate swaps(1)
$ 38,500 Other assets $ 3,045 $ 38,500 Accrued expenses and other liabilities $ 3,045
(1) Represents interest rate swaps with commercial banking clients, which are offset by derivatives with a third party.
As of December 31, 2024
Derivative Assets Derivative Liabilities
Original Notional Amount Balance Sheet Location Fair Value Original Notional Amount Balance Sheet Location Fair Value
(In thousands)
Derivatives designated as hedging instruments:
Interest rate swaps $ 75,000 Other assets $ 3,259 $ - Accrued expenses and other liabilities $ -
Fair value swap $ - Other assets $ - $ 150,000 Accrued expenses and other liabilities $ 259
Derivatives not designated as hedging instruments:
Interest rate swaps(1)
$ 38,500 Other assets $ 4,213 $ 38,500 Accrued expenses and other liabilities $ 4,213
(1) Represents interest rate swaps with commercial banking clients, which are offset by derivatives with a third party.
Liquidity and Capital Resources
Liquidity Management
Liquidity is defined as the ability to generate sufficient cash flows to meet all present and future funding requirements at reasonable costs. Our primary source of liquidity is deposits. While our generally preferred funding strategy is to attract and retain low cost deposits, our ability to do so is affected by competitive interest rates and terms in the marketplace. Other sources of funding include discretionary use of purchased liabilities (e.g., FHLB term advances and other borrowings), cash flows from our investment securities portfolios, loan sales, loan repayments and earnings. Investment securities designated as available for sale may also be sold in response to short-term or long-term liquidity needs.
The Bank's liquidity position is monitored daily by management. The Asset Liability Committee, or ALCO, establishes guidelines to ensure maintenance of prudent levels of liquidity. ALCO reports to the Company's Board of Directors.
The Bank has a detailed liquidity funding policy and a contingency funding plan that provide for the prompt and comprehensive response to unexpected demands for liquidity. We employ a stress testing methodology to estimate needs for contingent funding that could result from unexpected outflows of funds in excess of "business as usual" cash flows. The Bank has established unsecured borrowing capacity with the Pacific Coast Bank (PCBB), Atlantic Community Bankers Bank (ACBB), and Zion's Bank and also maintains additional collateralized borrowing capacity with the Federal Reserve Bank of New York ("FRBNY") and the FHLB in excess of levels used in the ordinary course of business. Our sources of liquidity include cash, unpledged investment securities, borrowings from the FRBNY, FHLB, lines of credit from PCBB, ACBB, and Zion's Bank, the brokered deposit market and national CD listing services.
Capital Resources
Shareholders' equity totaled $301.5 million as of December 31, 2025, an increase of $31.0 million compared to December 31, 2024, primarily a result of net income of $35.2 million for the year ended December 31, 2025. The increase was partially offset by dividends paid of $6.3 million. As of December 31, 2025, the tangible common equity ratio and tangible book value per share were 8.90% and $38.85, respectively.
The Bank and the Company are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. At December 31, 2025, the Bank met all capital adequacy requirements to which it was subject and exceeded the regulatory minimum capital levels to be considered well-capitalized under the regulatory framework. At December 31, 2025, the Bank's ratio of total common equity Tier 1 capital to risk-weighted assets was 11.87%, total capital to risk-weighted assets was 12.94%, Tier 1 capital to risk-weighted assets was 11.87% and Tier 1 capital to average assets was 10.56%. At December 31,
2025, the Company met all capital adequacy requirements to which it was subject and exceeded the regulatory minimum capital levels to be considered well-capitalized under the regulatory framework. At December 31, 2025, the Company's ratio of Common Equity Tier 1 capital to risk-weighted assets was 10.23%, total capital to risk-weighted assets was 13.69%, Tier 1 capital to risk-weighted assets was 10.23% and Tier 1 capital to average assets was 9.11%.
Under the current guidelines, banking organizations must have a minimum total risk-based capital ratio of 8.0%, a minimum Tier 1 risk-based capital ratio of 6.0%, a minimum common equity Tier 1 risk-based capital ratio of 4.5%, and a minimum Tier 1 capital to average assets ratio of 4.0% in order to be "adequately capitalized." In addition to these requirements, banking organizations must maintain a capital conservation buffer consisting of common Tier 1 equity in an amount above the minimum risk-based capital requirements for "adequately capitalized" institutions equal to 2.5% of total risk-weighted assets, resulting in a requirement for the Company and the Bank to effectively maintain common equity Tier 1, Tier 1 and total capital ratios of 7.0%, 8.5% and 10.5%, respectively. The Company and the Bank must maintain the capital conservation buffer to avoid restrictions on the ability to pay dividends, pay discretionary bonuses, or to engage in share repurchases.
Contractual Obligations
The following table summarizes our contractual obligations to make future payments as of December 31, 2025. Payments for borrowings do not include interest. Payments related to leases are based on actual payments specified in the underlying contracts.
Payments Due by Period
Total Less Than
1 Year 		1-3
Years 		4-5
Years 		After
5 Years
(in thousands)
Contractual Obligations:
FHLB advances $ 110,000 $ 110,000 $ - $ - $ -
Subordinated debt 70,000 - - - 70,000
Operating lease agreements 12,602 2,546 4,836 3,891 1,329
Time deposits with stated maturity dates 1,230,362 1,224,995 5,309 58 -
Total contractual obligations $ 1,422,964 $ 1,337,541 $ 10,145 $ 3,949 $ 71,329
Off-Balance Sheet Arrangements
In the normal course of business, we are a party to financial instruments with off-balance sheet risk to meet the financing needs of our clients. These financial instruments include commitments to extend credit and involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the financial statements. The contractual amounts of these instruments reflect the extent of involvement we have in particular classes of financial instruments.
We enter into contractual commitments to extend credit, normally with fixed expiration dates or termination clauses, at specified rates and for specific purposes. Substantially all of the Bank's commitments to extend credit are contingent upon clients maintaining specific credit standards at the time of loan funding. The Bank minimizes its exposure to loss under these commitments by subjecting them to credit approval and monitoring procedures.
Commitments to extend credit totaled $520.6 millionat December 31, 2025. The following table summarizes our commitments to extend credit as of the date indicated. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements. In addition, borrowers may be required to meet certain performance requirements to continue to draw on these commitments. We manage our liquidity in light of the aggregate amounts of commitments to extend credit and outstanding standby letters of credit in effect from time to time to ensure that we will have adequate sources of liquidity to fund such commitments and honor drafts under such letters of credit.
Loan pipeline, while not legally binding, represents the Company's future potential funding obligations which are currently in an advanced stage of underwriting and are subject to various conditions before disbursement. Loans in the pipeline are typically short-term, usually within 90 days.
As of December 31, 2025
Amount of Commitment Expiration per Period
Total Less Than
1 Year 		1-3
Years 		4-5
Years 		After
5 Years
(in thousands)
Other Commitments:
Loan pipeline $ 294,781 $ 294,781 $ - $ - $ -
Loan commitments 197,415 117,691 75,241 750 3,733
Undisbursed construction loans 26,244 7,014 9,466 3,859 5,905
Unused home equity lines of credit 2,189 - - - 2,189
Total other commitments $ 520,629 $ 419,486 $ 84,707 $ 4,609 $ 11,827
Recently Issued Accounting Pronouncements
See Note 1 to our Consolidated Financial Statements for details of recently issued accounting pronouncements and their expected impact on our financial statements.
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