Commitments and Contingencies

12 Months Ended

Dec. 31, 2024

Commitments and Contingencies Disclosure [Abstract]

Leases

As of December 31, 2024, the Company leases real estate for eight branch locations and headquarter office under various operating lease agreements. The branch leases have maturities ranging from 2028 to 2033, some of which include options to extend the lease term. Reference Note 7 for further detail.

Legal Matters

The Company is involved in various legal proceedings which have arisen in the normal course of business. Management believes that resolution of these matters will not have a material effect on the Company’s financial condition or results of operations.

Off-Balance Sheet Instruments

In the normal course of business, the Company is a party to financial instruments with off-balance sheet risk to meet the financing needs of its 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 the Company has in particular classes of financial instruments.

The contractual amounts of commitments to extend credit represent the amounts of potential accounting loss should the contract be fully drawn upon, the clients default, and the value of any existing collateral becomes worthless. Management uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments and evaluates each client’s creditworthiness on a case-by-case basis. Management believes that they control the credit risk of these financial instruments through credit approvals, credit limits, monitoring procedures and the receipt of collateral as deemed necessary.

Financial instruments whose contract amounts represented credit risk at December 31, 2024 was as follows:


	December 31,
	2024
	(In thousands)
Commitments to extend credit:
Loan pipeline	$	218,612
Loan commitments	173,203
Undisbursed construction loans	59,355
Unused home equity lines of credit	2,331
	$	453,501

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.

Loan commitments, undisbursed construction loans, and unused home equity lines of credit are agreements to lend to a client as long as there is no violation of any condition established in the contract or certain milestones in the case of construction loans or otherwise required collateral under borrowing base limits are met. They generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower. Since these commitments could expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the counter party. Collateral held varies, but may include residential and commercial property, deposits and securities.

These commitments subject the Company to potential exposure in excess of amounts recorded in the financial statements, and therefore, management maintains a specific reserve for unfunded credit commitments. This reserve is reported as a component of accrued expenses and other liabilities in the accompanying Consolidated Balance Sheets. The reserve for unfunded commitments totaled $755 thousand at December 31, 2024.

As of December 31, 2024, the Bank had a remaining capital commitment of $4.6 million to three Small Business Investment Companies ("SBIC") and a remaining capital commitment of $1.8 million in a private equity investment company. Contributions to these funds represent equity investments for the Company.

Bankwell Financial Group, Inc. 10-K