Company: BWFG
Filing Date: 2025-11-05
Form Type: 10-Q
Source: 0001505732-25-000162
Chunk: 90

Company: Bankwell Financial Group, Inc.
Filing Date: 2025-11-05
Form: 10-Q
Item: Part I, Item 1
Chunk 90
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 of interest rates would increase our net interest income by 5.50%, while a 100 basis-point parallel ramp decrease in interest rates would increase net interest income by 7.60%. As of December 31, 2024, we estimated that over the next two years, on a cumulative basis, a 200 basis-point parallel ramp increase of interest rates would decrease our net interest income by 2.90%, while a 100 basis-point parallel ramp decrease in interest rates would increase net interest income by 12.80%. The change in sensitivity between September 30, 2025 and December 31, 2024 was impacted by an increase in variable-rate loans.

We conduct an economic value of equity at risk simulation in tandem with net interest income simulations, to ascertain a longer term view of our interest rate risk position by capturing longer-term repricing risk and options risk embedded in the balance sheet. It measures the sensitivity of economic value of equity to changes in interest rates. The economic value of equity at risk simulation values only the current balance sheet and does not incorporate the growth assumptions used in one of the income simulations. As with the net interest income simulation, this simulation captures product characteristics such as loan resets, repricing terms, maturity dates, rate caps and floors. Key assumptions include loan prepayment speeds, deposit pricing elasticity and non-maturity deposit attrition rates. These assumptions can have significant impacts on valuation results as the assumptions remain in effect for the entire life of each asset and liability. All key assumptions are subject to a periodic review.

Base case economic value of equity at risk is calculated by estimating the net present value of all future cash flows from existing assets and liabilities using current interest rates. The base case scenario assumes that future interest rates remain unchanged.

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The following table sets forth the estimated percentage change in our economic value of equity at risk, assuming various shifts in interest rates:

Estimated Percent Change in Economic Value of Equity ("EVE")Rate Changes (basis points)September 30, 2025December 31, 2024-100(0.10)%0.40 %+100(0.50)%(1.30)%+200(1.70)%(3.60)%+300(2.30)%(4.70)%

While ALCO reviews and updates simulation assumptions and also periodically back-tests the simulation results to ensure that the assumptions are reasonable and current, income simulation may not always prove to be an accurate indicator of interest rate risk or future net interest margin. Over