Company: BWFG
Filing Date: 2025-03-05
Form Type: 10-K
Source: 0001505732-25-000052
Chunk: 135

Company: Bankwell Financial Group, Inc.
Filing Date: 2025-03-05
Form: 10-K
Item: Item 7
Chunk 135
---
. 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, 2024 and 2023 was as follows:

As of December 31, 2024Derivative AssetsDerivative LiabilitiesOriginal Notional AmountBalance Sheet LocationFair ValueOriginal Notional AmountBalance Sheet LocationFair 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,