Bridgewater Bancshares (NASDAQ:BWB) reported record total revenue and pre-provision net revenue for the third quarter of 2026, as higher core deposits, loan growth and continued loan repricing supported profitability, executives said on the company’s earnings call.
Chairman and Chief Executive Officer Jerry Baack said the bank’s strategy during the year emphasized balancing growth with profitability. Bridgewater had slowed loan growth earlier in the year amid increased loan competition and what Baack characterized as aggressive pricing, while anticipating that core deposit growth would improve in the second half.
That deposit growth returned during the third quarter, with core deposits increasing by $165 million, or at a 20% annualized rate. The increase enabled Bridgewater to accelerate loan growth to a 7.2% annualized pace during the quarter. Year to date, loan balances rose at a 6.1% annualized rate, compared with 6.4% annualized growth in core deposits.
Revenue Growth and Margin Expansion
President and Chief Financial Officer Joe Chybowski said pre-provision net revenue increased 36% from a year earlier, while total revenue rose 20%. Net interest income grew at a 22% annualized rate in the third quarter, driven by a 16% annualized increase in average earning assets and further net interest margin expansion.
Net interest margin increased 2 basis points from the prior quarter to 3.09%. Loan yields rose 5 basis points to 5.96%, while deposit costs remained at 2.78% for the third consecutive quarter. Average yields on new loan production were in the mid-6% range, Chybowski said.
Bridgewater expects its margin to remain relatively stable in the near term despite higher interest rates. The outlook assumes another rate hike in December and two additional increases in the first half of 2027, according to Chybowski.
The company has increased the variable-rate share of its loan portfolio to 26%, from 15% two years earlier. Bridgewater now has $1.2 billion of variable-rate loans, compared with $1.6 billion of deposits tied directly to short-term rates. The bank also has $697 million of fixed-rate loans scheduled to mature over the next 12 months at a weighted average yield of 5.70%, along with $105 million of adjustable-rate loans repricing or maturing at a 4.23% yield.
“With these lower yields running off the books and new originations going on the books at higher yields, we have further repricing upside ahead of us,” Chybowski said.
Expenses, Deposits and Lending
Non-interest expense declined in the third quarter, helping push Bridgewater’s efficiency ratio below 50% for the first time since the first quarter of 2023. Chybowski said expenses were lower than management had expected, though fourth-quarter non-interest expense is expected to return to approximately the second-quarter level.
Chief Banking Officer Nick Place attributed core deposit growth to seasonal patterns, new client relationships, treasury-management hires and market disruption. Non-interest-bearing deposits increased by $63 million during the quarter, while higher-cost brokered deposits declined by $96 million.
Place said core deposits will remain the primary constraint on loan growth. The bank expects near-term loan growth in the mid-single-digit range as it navigates the higher-rate environment, potential slowing in originations and changes in payoff activity.
Construction, non-owner-occupied commercial real estate and commercial-and-industrial lending generated most of the third-quarter loan growth. Multifamily balances declined because of elevated payoff and refinance activity.
Affordable housing remains a major lending focus. The segment accounted for more than 25% of third-quarter loan growth and represented 16% of total loans at quarter-end. Affordable housing balances grew 20% year over year, management said. Place said these loans generally carry higher yields than traditional multifamily or commercial real estate loans and often generate compensating deposit balances.
Credit Quality and Reserves
Chief Credit Officer Katie Morrell said watch and special-mention loans fell about 50% from year-end 2025 and represented 0.5% of total loans. Nonperforming assets declined modestly from the second quarter to 37 basis points.
Nonperforming assets remained concentrated in two relationships. Bridgewater recorded a $2.4 million charge-off on a $10 million mixed-use multifamily property during the third quarter as it moved toward a sale of the asset. The charge-off contributed to annualized net charge-offs of 0.21% for the quarter.
The bank also increased the specific reserve on an $8.6 million central business district office loan to $5.3 million. The loan has been on non-accrual status since the first quarter of 2025. Morrell said some of that existing reserve could ultimately migrate to charge-offs as Bridgewater works toward resolving the credit.
The allowance for credit losses declined 2 basis points to 1.28%, despite a higher provision during the third quarter. Management expects provision expense to rise modestly in the fourth quarter because of anticipated loan growth and continued work to resolve the two larger nonperforming credits.
Capital and Strategic Initiatives
Bridgewater’s common equity tier 1 ratio rose 55 basis points from a year earlier to 9.63%. The company did not repurchase shares in the third quarter. Chybowski said management believes retained earnings can support expected growth while maintaining flexibility around its share repurchase authorization and at-the-market equity program.
Baack said Bridgewater added 17 employees amid merger-and-acquisition-related disruption in the market. The company has also advanced to the execution phase of its artificial intelligence strategy, establishing oversight, security and risk frameworks while deploying tools and partnerships intended to support operational efficiencies.
Baack said management remains optimistic about the remainder of 2026 and 2027, citing the company’s profitability momentum, deposit growth and focus on disciplined expansion.
About Bridgewater Bancshares (NASDAQ:BWB)
Bridgewater Bancshares, Inc is the bank holding company for Bridgewater Bank, a community-focused commercial bank headquartered in St. Louis Park, Minnesota. Founded in 2005, the company serves businesses, real estate professionals, entrepreneurs and individuals primarily in the Minneapolis–St. Paul metropolitan area and surrounding markets.
Bridgewater Bank provides commercial and consumer banking products, including commercial real estate loans, commercial and industrial financing, residential real estate lending, construction and development loans, personal and business deposit accounts, cash-management services and online banking.
