Bankwell Financial Group (NASDAQ:BWFG) reported higher second-quarter 2026 earnings as the company cited margin expansion, loan growth, core deposit gains and continued contributions from its Small Business Administration lending division.
Chris Gruseke, Bankwell’s chief executive officer, said the quarter reflected “strong execution” and progress on strategic priorities, including efforts to strengthen the company’s deposit base, reduce wholesale funding and diversify revenue. The company reported GAAP net income of $12.4 million, or $1.52 per share, compared with $11.3 million, or $1.41 per share, in the first quarter.
Loan and deposit growth accelerate
Loan balances increased by $93 million, or 3.2%, from the prior quarter, bringing gross loans to $3 billion at quarter-end. Gruseke said new originations continued to outpace portfolio runoff.
During the question-and-answer portion of the call, Matt McNeill, Bankwell’s president and chief banking officer, said the company’s increased loan growth outlook reflected revised assumptions about runoff rather than a broad change in customer acquisition strategy.
“We had a lot of loans refinance away from us or leave the bank last year,” McNeill said. “It impacted our ability to grow the loan book early in the year. We looked at those assumptions and raised them.”
McNeill said the company remains relationship-driven, with growth coming from deepening relationships with existing customers across areas including healthcare, investor commercial real estate and commercial and industrial lending.
Core deposits rose by $128 million during the quarter. That included $72 million of growth in non-interest-bearing and NOW accounts, with non-interest-bearing deposit growth including about $44 million in increased analyzed checking balances. Gruseke said analyzed checking balances were up approximately $68 million, or about 17%, year to date.
The company also reduced wholesale funding by $44 million during the quarter. Gruseke said brokered balances have fallen by $520 million, or about 51%, since their peak at the end of 2022. In response to an analyst question about whether brokered deposits could fall below 10% of deposits over the next year, Gruseke said that would be “aggressive,” but added that the balance should continue to decline over time.
Margin expands as deposit costs fall
Courtney Sacchetti, Bankwell’s chief financial officer and executive vice president, said profitability for the quarter was “outstanding.” Return on average assets was 1.46%, while return on average tangible common equity was 15.61%.
Pre-provision net revenue rose 31.4% to $17.5 million, or 2.07% of average assets, from $13.3 million in the prior quarter. Net interest income totaled $29.5 million, up from $26.9 million in the first quarter. Net interest margin expanded 30 basis points to 3.58%.
Sacchetti said the margin improvement was driven by favorable repricing on both sides of the balance sheet. Deposit costs improved by 16 basis points to 2.94%, while earning asset yields increased by 11 basis points to 6.26%. She said new loan production carried an average rate of 7.16% and continued to outpace runoff.
Sacchetti also said the company repriced $0.6 billion of time deposits in the first half of 2026 at a 36-basis-point improvement, representing an annualized benefit of $2.3 million. However, she noted that the benefit will diminish as much of the higher-cost time deposit base has already been repriced.
Asked about the outlook for the margin, Sacchetti said she expected some additional expansion in the third quarter, assuming no other changes, with remaining room in time deposit repricing before the benefit begins to moderate in the fourth quarter and beyond.
SBA gains support non-interest income
Non-interest income totaled $3.3 million for the quarter, including $2.4 million of gains on SBA loan sales. Gruseke said SBA loan sale gains totaled $4.8 million for the first half of 2026, compared with $1.5 million in the first half of 2025.
“This business remains an important and growing part of diversifying our revenue stream,” Gruseke said.
Despite the strong first-half SBA contribution, Bankwell maintained its full-year non-interest income guidance of $12 million to $13 million. In response to an analyst question, McNeill said the company is intentionally keeping SBA production controlled because it retains a portion of the non-SBA-guaranteed pieces of those loans.
“For risk management purposes, we’re going slow and steady,” McNeill said.
Credit quality improves
Bankwell reported improvement in credit quality during the quarter. Total non-performing loans declined by $3.2 million to $15.9 million, and non-performing assets as a percentage of total assets fell by 10 basis points to 46 basis points. Reserve coverage of non-performing loans strengthened to approximately 193%.
The provision for credit losses was $1.2 million, which Sacchetti said was driven by loan growth. The allowance ended the quarter at 1.03% of total loans.
Asked about the remaining non-performing loan portfolio, McNeill said the outlook was “good” and that the company sees paths to further reducing the total in coming quarters. Sacchetti said the company has taken write-downs as appropriate and believes its real estate portfolio is marked appropriately based on available information.
Total assets ended the quarter at $3.5 billion, while deposits totaled $3 billion. Shareholders’ equity increased to $323.5 million, and fully diluted tangible book value per share rose to $40.25. Gruseke said the company added $2.41 to tangible book value per share in the first half of 2026.
Company raises key full-year guidance
Bankwell raised several full-year 2026 guidance measures. The company now expects loan growth of 5% to 7% and full-year net interest income of $115 million to $117 million. It affirmed its prior non-interest income outlook of $12 million to $13 million.
The company also raised its full-year non-interest expense guidance to $65 million to $67 million, citing targeted investments in talent and infrastructure as well as compensation for performance. Gruseke said the higher expense outlook was not expected to negatively affect the efficiency ratio given the updated revenue guidance.
Sacchetti said the second-quarter efficiency ratio was 47.5%, bringing the year-to-date ratio to 51.4%. In response to analyst questions, management emphasized that any increase in expenses would be tied to performance and scale.
“We don’t want to be in the business and won’t be in the business of increasing expenses and decreasing our efficiency ratio,” McNeill said. “This is about scale.”
Gruseke said the company’s first-half performance showed progress on priorities laid out in 2024, including investing in the deposit franchise, paying down wholesale funding, increasing non-interest income and growing its consolidated Tier 1 capital ratio.
About Bankwell Financial Group (NASDAQ:BWFG)
Bankwell Financial Group, Inc is a bank holding company headquartered in New Canaan, Connecticut, and serves as the parent company of Bankwell Bank. Bankwell Bank provides commercial, business and personal banking services, with branch locations primarily across Fairfield and New Haven counties in Connecticut, along with a New York presence.
The company’s deposit offerings include checking, savings and money market accounts, as well as certificates of deposit, all supported by an online and mobile banking platform for convenient account access.
