A Connecticut-based bank said it will take an $8.2 million third-quarter hit from a nonperforming commercial office loan.
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 third quarter financial performance will be “adversely impacted” by an $8.2 charge off it will take against a $13.2 million commercial loan backed by a Class A suburban New Jersey office park that is in foreclosure.
Bankwell was a 17% participant in a larger $84 million loan for the undisclosed office property that was underwritten by multiple lenders, the bank said.
The loan had been reported as nonperforming in the second quarter of this year, and had no previous reserve, the bank said.
In April, the undisclosed office property had an appraised value of $105.1 million. An updated appraisal valued the property at $36.2 million, the bank said.
“As of September 30, 2024, the borrower is in payment default and the bank group has commenced foreclosure,” Bankwell disclosed in the SEC filing.
After the charge off, Bankwell estimated its remaining exposure on the loan is approximately $5.5 million.
The charge off comes as banks in Connecticut and across the country keep close tabs on their office building loans as that sector continues to face pressure from a tenant downsizing trend spurred by the wider embrace of remote work.
During the second quarter, Bankwell reported a profit of $1.1 million, or 14 cents per share, down from an $8 million profit, or $1.02 per share, in the year-ago period.
The bank’s stock price was trading at $29.62 Tuesday morning, down from its 52-week high price of $31.09.
