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July 22, 2024 What’s Trending

Nonperforming loan forces CT bank to set aside $6.6M reserve

COSTAR Bankwell Financial’s New Canaan headquarters at 258 Elm St.
By Greg Bordonaro

A Connecticut-based bank said it will take a $6.6 million second-quarter hit from a nonperforming loan that was used to help finance a dental practice deal.

Bankwell Financial Group Inc., parent company of New Canaan-based community bank Bankwell, disclosed in a U.S. Securities and Exchange Commission filing that its second quarter financial performance will be “adversely impacted” by $6.6 million it will set aside in reserve.

The set aside stems from an $8.7 million commercial loan the bank originated in 2022 to help finance “a sponsor-owned pediatric dental practice.”

According to the bank, the loan was reported as nonperforming as of the fourth quarter of 2023.

“The sponsor and seller are engaged in ongoing litigation, causing unresolved billing issues and restricted cash flows,” Bankwell said of the dental practice deal it helped finance.

It didn’t provide any more details about the loan or the deal.

Banks must set aside a reserve, or loan loss provision, to cover loans that have gone bad, or may go bad in the future. That loan loss provision counts as an expense on a bank’s income statement, meaning it has a direct impact on profitability.

Bankwell Financial said it previously set aside $400,000 in reserves to cover the dental practice loan, which means its remaining exposure is $1.7 million.

Bankwell, with $3.15 billion in assets, operates branches in New Canaan, Stamford, Fairfield, Westport, Darien, Norwalk and Hamden.

In the first quarter of 2024, the bank reported profits of $3.76 million, or 48 cents per share, down from $10.38 million, or $1.34 per share, in profits in the year-ago period.

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