Bankwell Financial Group (NASDAQ:BWFG) reported a “solid start to 2026” in the first quarter, citing strong earnings, improving funding mix, and continued progress on strategic priorities, according to comments from Chief Executive Officer Chris Gruseke on the company’s quarterly earnings call.
First-quarter earnings and key drivers
For the first quarter, Gruseke said Bankwell posted GAAP net income of $11.3 million, or $1.41 per share. He attributed the results to “solid loan production,” “strong fee income from our SBA platform,” lower funding costs, “meaningful core deposit growth,” and continued balance sheet optimization, including reduced reliance on wholesale funding.
Net interest margin, deposit costs, and repricing tailwinds
Sacchetti said net interest margin declined modestly to 328 basis points, driven primarily by the repricing of floating-rate loans in a lower-rate environment and an unfavorable day-count impact. She added that, on a day-count normalized basis, the sequential net interest margin variance would have been about 5 basis points.
Management pointed to continued progress in deposit costs. Total deposit costs declined to 310 basis points, down 5 basis points from the fourth quarter, and Sacchetti said the bank exited March with a deposit-cost exit rate of approximately 298 basis points.
During the quarter, Sacchetti said the company repriced approximately $300 million of time deposits 44 basis points lower, generating an expected annualized benefit of $1.2 million. Looking ahead, she said about $1.1 billion of time deposits are expected to reprice over the next 12 months, with an average rate reduction of 14 basis points—an incremental annualized benefit of roughly $1.6 million, or about 5 basis points of net interest margin.
In the Q&A session, President and Chief Banking Officer Matt McNeill said deposit competition remains “very competitive,” particularly for low-cost deposits, but said the company has still been able to grow core deposits and improve mix. McNeill noted that the company used deposit inflows to help pay down more expensive borrowings.
Sacchetti said that as deposit repricing continues and interest rate sensitivity moderates, the company expects incremental margin improvement over the balance of 2026 and affirmed full-year net interest income guidance of $111 million to $112 million.
Loan growth, pipeline, and SBA fee income
Gruseke said loan growth remained positive, with $190 million of originations in the quarter, including $34 million of SBA production, resulting in net loan growth of $27 million. He said the annualized pace is consistent with previously communicated full-year loan growth guidance of 4% to 5% and added that the pipeline remains strong.
On loan pricing, Sacchetti said the average rate on first-quarter originations was 7.5%.
Non-interest income totaled $3.3 million for the quarter, including $2.4 million of SBA gain-on-sale income, according to both Gruseke and Sacchetti. Sacchetti said service fee income also continued to grow, driven by an expanding commercial client base.
Based on first-quarter results, Sacchetti said the company raised its full-year non-interest income guidance to $12 million to $13 million. McNeill said the SBA team “could definitely originate more SBA loans,” but management is choosing to keep volume “kind of level where it’s at,” and is not increasing the previously discussed $100 million level tied to how the company had been thinking about fee income.
Funding mix, expenses, credit, and capital
Gruseke highlighted core deposit growth of $113 million sequentially, with $39 million coming from low-cost deposits. He said that included $24 million of growth in analyzed checking balances, an 8% increase in the quarter. He also said Bankwell reduced broker deposit balances and Federal Home Loan Banks borrowings by a combined $95 million during the quarter, further improving the funding mix. Since the end of 2022 peak levels, Gruseke said broker deposits have been reduced by $513 million, a 50% decline.
On expenses, Sacchetti said non-interest expense rose to $16.9 million in the first quarter due to about $1 million in annual costs that are typically incurred in the first quarter, primarily related to employee compensation and certain professional services. She said the underlying run rate remains consistent with prior guidance of $64 million to $65 million. The efficiency ratio was 55.8%, which Sacchetti said reflects first-quarter seasonality.
Credit metrics were described as healthy, though management acknowledged some movement in non-performing assets. Gruseke said non-performing assets increased modestly to 56 basis points of total assets, but said the company has visibility into the resolution of several credits over the coming quarters. In response to an analyst question, McNeill said one increase in non-accruals was related to a commercial real estate situation where a tenant left and the sponsor was not able to make the payment; he said there is equity in the deal and the bank expects to work with the sponsor to dispose of the real estate and be repaid.
Sacchetti said the provision for credit losses was a $1 million release in the quarter, driven by the net impact of loan growth and economic factors embedded in the CECL model. The allowance for credit losses ended the quarter at 1.03% of total loans, with coverage of non-performing loans at approximately 155%.
On capital and liquidity, Sacchetti said total assets ended the quarter at $3.4 billion and deposits totaled $2.9 billion. She said tangible common equity was 9.17% and the consolidated Common Equity Tier 1 ratio was approximately 10.58%. The company repurchased 3,317 shares during the quarter at an average price of $45.32 per share. McNeill said the company evaluates repurchases when not in blackout periods and indicated buybacks could increase over the course of the year, while noting a continued goal of reaching an 11% CET1 ratio at the holding company over time.
Gruseke also noted the opening of the company’s first full-service New York branch during the quarter in Bay Ridge, Brooklyn, which he said is home to an experienced private client banking team that joined in 2025. In the Q&A, McNeill said the branch was “definitely a deposit play,” with modest lending expected, while Gruseke emphasized the company opened the branch to support the needs of the deposit team rather than pursuing a broader branch expansion strategy.
About Bankwell Financial Group (NASDAQ:BWFG)
Bankwell Financial Group, Inc is a bank holding company headquartered in Westchester, Illinois, and serves as the parent of Bankwell Bank. Through its subsidiary, the company provides a full suite of banking products and services designed for both individual consumers and small‐ to mid‐sized businesses. Bankwell Bank operates multiple branches across suburban Cook and Lake counties, focusing on personalized service and local decision‐making.
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.
