Bankwell Q3 Earnings Rise as Margin and Credit Metrics Improve

Bankwell Financial Group reported higher third-quarter earnings as wider lending spreads, SBA loan-sale gains and improved credit metrics offset $3.0 million of pre-tax expenses tied to the bank’s core-system conversion.

The Stamford, Connecticut-based bank reported net income of $12.7 million for the quarter ended September 30, 2026, up from $12.4 million in the second quarter and $10.1 million a year earlier. Diluted earnings per share rose to $1.58 from $1.52 sequentially and $1.27 in the year-earlier period.

Excluding core-conversion costs, operating net income was $15.0 million, or $1.86 per diluted share. Operating return on average assets was 1.71%, while operating return on average tangible common equity was 18.02%.

Margin and fee income strengthen revenue

Net interest income increased to $31.4 million from $29.5 million in the prior quarter and $26.0 million a year earlier. Net interest margin expanded by 13 basis points sequentially to 3.71%, supported by an eight-basis-point increase in earning-asset yields and unchanged funding costs, according to the presentation.

Loan yields reached 6.72%, up six basis points from the second quarter. Bankwell said yields on loans originated in 2026 were about 90 basis points higher than those on loans running off. Deposit costs declined to 2.92% from 2.94% in the prior quarter, with a September exit rate of 2.94%.

Noninterest income rose 21% from the second quarter to $4.0 million, including $2.8 million of gains from SBA loan sales. Total revenue increased to $35.3 million from $32.8 million sequentially and $28.5 million a year earlier.

Reported noninterest expense climbed to $19.8 million from $15.3 million in the second quarter, primarily reflecting the core conversion and the termination of existing provider contracts. The reported efficiency ratio was 56.1%; excluding conversion costs, the operating efficiency ratio was 47.5% for the quarter and 50.0% for the first nine months of 2026.

Loans grow as deposit mix shifts

Loans increased by $23 million during the quarter on approximately $222 million of originations, including $30 million of SBA production. Through the first nine months of 2026, net loans grew by $143 million, or 5.0%. Gross loans receivable, excluding loans held for sale, totaled $2.98 billion at quarter-end.

The rate structure of the portfolio has also changed. Floating-rate loans represented 44% of total loans at September 30, compared with 23% at the end of 2024. Bankwell said the mix, together with a declining share of time deposits, reduces its dependence on any single interest-rate outcome.

Total deposits declined to $2.97 billion from $3.00 billion at the end of the second quarter but remained above $2.76 billion a year earlier. Core deposits accounted for 76% of total deposits, up from 69% in the third quarter of 2025. Core balances declined by less than 1%, or $20 million, sequentially but were $340 million higher than a year earlier.

Noninterest-bearing and NOW deposits totaled $554 million, down from $605 million in the second quarter but 15% above the year-earlier level. Brokered deposits stood at $507 million, down $520 million from their reported peak.

Asset quality improves after loan sale

Nonperforming assets fell to $7.1 million, or 0.20% of total assets, from $15.9 million, or 0.46%, in the second quarter. The improvement primarily reflected the sale of a COVID-era nonperforming commercial real estate retail loan in Westchester County, New York, which resulted in a $2.5 million recovery.

Bankwell recorded a $1.3 million credit for credit losses and $1.4 million of net recoveries during the quarter. Its allowance for credit losses was $30.7 million, equivalent to 1.03% of loans. Loans rated “pass” represented 95.6% of the portfolio, while nonperforming loans declined to 0.24% of total loans from 0.54% in the previous quarter.

Commercial real estate investor loans represented 38.3% of the portfolio, down from 39.8% at the end of 2025. Owner-occupied commercial real estate and commercial-and-industrial loans together accounted for 54.0%. The bank reported a commercial real estate concentration ratio of 321% and a construction concentration ratio of 34%.

Bankwell also disclosed a combined healthcare portfolio of $1.12 billion, consisting primarily of skilled nursing facilities across the U.S. The presentation said all skilled-nursing loans carry recourse. Healthcare represented 38% of the bank’s $727 million commercial-and-industrial portfolio.

Capital and liquidity remain above stated minimums

Total assets reached $3.56 billion at quarter-end, while shareholders’ equity increased to $334.1 million. Fully diluted tangible book value per common share rose to $41.59 from $40.25 in the second quarter and $36.84 a year earlier. The tangible common equity ratio was 9.33%, and the estimated consolidated common equity Tier 1 ratio was 10.80%.

The bank reported $1.86 billion of available liquidity against $1.07 billion of uninsured deposits, representing 1.7 times coverage. Insured and secured deposits totaled $1.90 billion. Approximately 202,000 shares remained available for repurchase under the current authorization.

Bankwell did not provide a specific earnings or balance-sheet forecast. Its forward-looking plans remain subject to credit, interest-rate, funding and other risks identified in its regulatory filings. Portfolio concentrations, including commercial real estate and healthcare lending, remain among the principal exposures disclosed in the presentation.