KBRA lowers Bankwell

KBRA said it downgraded Bankwell Financial Group, Inc.’s ratings, including the senior unsecured debt rating to BBB- from BBB and the subordinated debt rating to BB+ from BBB-. The agency also lowered the company’s subsidiary, Bankwell Bank’s ratings, including the senior unsecured debt ratings to BBB from BBB+ and the subordinated debt rating to BBB- from BBB.

“The downgrade of Bankwell’s ratings was driven by its diminished core capital profile –– including a nearly 170 bp decline in the CET1 ratio (to 8.2%) from 2Q22 to 1Q23. The bank’s significant 1Q23 LTM loan growth of 39%, primarily via its healthcare/senior housing lending vertical, is the primary driver of the regulatory capital depletion,” the agency said in a statement.

On the positive side, “Bankwell’s loan portfolio has yet to show meaningful signs of credit deterioration, as the bank’s problem asset levels remain modest and primarily idiosyncratic in nature. Conservative underwriting standards have supported minimal loss content over time, evidenced by an average annual NCO ratio of <10 bps since 2014,” KBRA said.

The outlook is stable.

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