Company: BWFG
Filing Date: 2025-03-05
Form Type: 10-K
Source: 0001505732-25-000052
Chunk: 66

Company: Bankwell Financial Group, Inc.
Filing Date: 2025-03-05
Form: 10-K
Item: Item 1A
Chunk 66
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, which results in unauthorized access to our data could expose us to a disruption or challenges relating to our daily operations as well as to data loss, litigation, damages, fines and penalties, significant increases in compliance costs, and reputational damage, any of which could have a material adverse effect on our business, results of operations, financial condition and future prospects.

22

We are subject to losses due to fraudulent and negligent acts on the part of loan applicants, our clients, vendors, bad actors, and/or our employees.

When we originate loans, we rely heavily upon information supplied by third parties, including the information contained in the loan application, property appraisal, title information and employment and income documentation.  Additionally, the current and potential future utilization of AI by the Company in support of loan origination could create additional risk for misrepresented information. If any of this information is intentionally or negligently misrepresented and such misrepresentation is not detected prior to loan funding, the value of the loan may be significantly lower than expected. Whether a misrepresentation is made by the loan applicant, our clients, vendors, bad actors, and/or one of our employees, we generally bear the risk of loss associated with the misrepresentation. A loan subject to a material misrepresentation is typically unsaleable or subject to repurchase if it is sold prior to detection of the misrepresentation, and the persons and entities involved are often difficult to locate and it is often difficult to collect any monetary losses that we have suffered from them. We cannot provide assurance that we have detected or will detect all misrepresented information in our loan originations, however, we have controls and processes designed to help us identify misrepresented information in our loan origination operations, including human oversight of AI activity.

As a financial institution, we are inherently exposed to risk in the form of theft and other fraudulent activities by clients, vendors, bad actors, and/or employees targeting the Bank or our clients. These activities can manifest in many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering, and other dishonest acts. The increasing sophistication of fraudulent activity could damage our reputation, result in the loss of business, subject us to increased regulatory scrutiny or to civil litigation and possible financial liability. Any of these outcomes  could have an adverse effect on our results of operation and financial condition. To mitigate these risks, we maintain effective policies and internal controls, leverage technology, and provide ongoing employee training focused on identifying and preventing such incidents.

We may be unsuccessful in identifying and completing the acquisition of whole financial institutions or related lines of