Bridgewater Bancshares Reports Strong Third-Quarter 2026 Earnings Growth and Improved Profitability
Bridgewater Bancshares, Inc. (Nasdaq: BWB), the parent company of Bridgewater Bank, has reported higher earnings for the third quarter of 2026, supported by revenue growth, an expanding net interest margin, stronger core deposits and disciplined expense management. The company recorded net income of $15.0 million for the quarter ended September 30, 2026, compared with $14.0 million in the second quarter of 2026 and $11.6 million in the third quarter of 2025.
Diluted earnings per common share reached $0.49 in the third quarter of 2026, compared with $0.45 in the preceding quarter and $0.38 in the year-earlier period. The results reflect continued progress in the company’s profitable growth strategy, as Bridgewater Bancshares expanded its balance sheet and improved operating efficiency while maintaining its focus on client relationships and credit quality.
Jerry Baack, Chairman and Chief Executive Officer of Bridgewater Bancshares, said the company delivered a strong quarter characterized by profitability improvements and balance sheet growth. He highlighted revenue growth across business areas, well-controlled operating expenses and an efficiency ratio below 50% for the first time since the first quarter of 2023.
Baack also emphasized the importance of core deposit growth in supporting the bank’s organic lending activities, improving its deposit mix and contributing to net interest margin expansion. Looking ahead, the company believes its balance sheet is better positioned for a higher-interest-rate environment following a strategic shift toward more variable-rate loans over the past several years.
The company also plans to continue strengthening customer relationships through personalized banking services and an approach focused on generating sustainable growth and long-term shareholder value.
Net Income and Earnings Per Share Increase
Bridgewater Bancshares delivered year-over-year earnings growth during the third quarter of 2026. Net income increased by $3.4 million from $11.6 million in the third quarter of 2025 to $15.0 million in the latest reporting period, representing an increase of approximately 29.3%.
Compared with the second quarter of 2026, net income increased by $1.0 million, or approximately 7.1%. Diluted earnings per share also improved from $0.45 in the second quarter to $0.49 in the third quarter, while the year-over-year comparison showed an increase from $0.38.
For the first nine months of 2026, the company reported diluted earnings per share of $1.52, compared with $1.06 for the same period in 2025. Basic earnings per share for the first nine months reached $1.56, up from $1.08 a year earlier.
The company’s reported financial measures also showed improvement in several profitability indicators. Return on average assets was 1.08% for the third quarter of 2026, compared with 1.06% in the second quarter and 0.86% in the third quarter of 2025.
Return on average shareholders’ equity reached 10.81%, compared with 10.17% in the preceding quarter and 9.47% a year earlier. Return on average tangible common equity increased to 11.91%, compared with 11.15% in the second quarter and 10.50% in the third quarter of 2025.
These indicators reflect the company’s ability to generate stronger earnings relative to its assets and equity base. The results were supported by higher net interest income, improvements in funding costs and tighter management of operating expenses.
Net Interest Margin Expands to 3.09%
Net interest income remained a key contributor to Bridgewater Bancshares’ quarterly performance. The company reported net interest income of $40.7 million for the third quarter of 2026, an increase of $2.1 million from $38.6 million in the second quarter and $6.6 million from $34.1 million in the third quarter of 2025.
Net interest margin, calculated on a fully tax-equivalent basis, reached 3.09% in the third quarter of 2026. This represented an increase of two basis points from 3.07% in the previous quarter and 46 basis points from 2.63% in the year-earlier period.
Core net interest margin, a non-GAAP financial measure that excludes loan fees and purchase accounting accretion attributable to the acquisition of First Minnetonka City Bank, increased to 2.98%. That compared with 2.94% in the second quarter of 2026 and 2.52% in the third quarter of 2025.
The quarterly improvement was primarily driven by growth and repricing in the loan and investment securities portfolios at higher yields. Higher cash balances also contributed to the increase in net interest income, although some of the benefit was offset by higher deposit balances.
On a year-over-year basis, stronger loan growth and higher loan yields, combined with lower rates paid on deposits, supported the expansion in net interest income and net interest margin. These developments indicate that the company benefited from improved returns on earning assets and a lower cost of deposit funding compared with the same period last year.
Net interest income is a critical measure for commercial banks because it reflects the difference between income earned on loans and other interest-generating assets and the interest paid on deposits and borrowings. Sustained improvement in this measure can support profitability, provided that credit costs and operating expenses remain manageable.
Loan Yields Improve as Interest Income Grows
Bridgewater Bancshares reported interest income of $76.6 million for the third quarter of 2026, an increase of $4.0 million from $72.7 million in the second quarter and $3.0 million from $73.6 million in the third quarter of 2025.
The yield on interest-earning assets, calculated on a fully tax-equivalent basis, rose to 5.76% in the third quarter. This compared with 5.73% in the preceding quarter and 5.63% in the year-earlier period.
The improvement reflected growth and repricing in the loan portfolio at higher yields, along with higher-yielding investment securities balances. The company’s aggregate loan yield reached 5.96%, up from 5.91% in the second quarter and 5.79% in the third quarter of 2025.
Core loan yield, which excludes specified loan fees and purchase accounting effects, increased to 5.82%. This was six basis points higher than the 5.76% reported in the second quarter and 16 basis points above the 5.66% recorded in the third quarter of 2025.
The figures demonstrate the contribution of loan pricing and portfolio composition to the company’s overall earnings performance. Bridgewater Bancshares has also been shifting its lending mix toward more variable-rate loans, which may help its asset yields respond to changes in market interest rates.
However, variable-rate lending can create different risks for borrowers and lenders as interest rates change. Higher borrowing costs may affect customers’ ability to repay loans, making underwriting standards and ongoing credit monitoring important parts of the bank’s growth strategy.
Deposit Costs and Funding Expenses
Interest expense totaled $36.0 million in the third quarter of 2026, compared with $34.1 million in the second quarter and $39.5 million in the third quarter of 2025.
Although interest expense increased sequentially as deposit balances and certain funding costs rose, it declined year over year as the company benefited from lower rates paid on interest-bearing deposits.
Interest expense on deposits was $30.9 million in the third quarter, an increase from $29.7 million in the second quarter but a decrease from $34.6 million in the third quarter of 2025.
The cost of total deposits fell to 2.78%, compared with 2.80% in the preceding quarter and 3.19% a year earlier. The sequential improvement was primarily attributable to lower rates paid on brokered deposits and an increase in noninterest-bearing deposits. Year-over-year, lower deposit rates following interest rate cuts in 2025 and growth in noninterest-bearing balances contributed to the reduction.
The cost of funds was 2.92% in the third quarter, compared with 2.91% in the second quarter and 3.25% in the third quarter of 2025.
Managing funding costs remains important for banks seeking to protect their net interest margins. Bridgewater Bancshares’ ability to attract core deposits while reducing reliance on more expensive funding sources helped support its profitability during the reporting period.
Core Deposit Growth Strengthens the Balance Sheet
Total deposits reached $4.47 billion as of September 30, 2026, an increase of $126.8 million from $4.35 billion at June 30, 2026. Compared with September 30, 2025, deposits increased by $180.3 million from $4.29 billion.
Core deposits, defined by the company as total deposits less brokered deposits and certificates of deposit greater than $250,000, increased by $165.3 million from the previous quarter and $234.3 million year over year.
Noninterest-bearing transaction deposits rose to $893.8 million at September 30, 2026, compared with $831.0 million at the end of June and $822.6 million a year earlier.
Interest-bearing transaction deposits totaled $947.1 million, while savings and money market deposits reached approximately $1.54 billion. Time deposits increased to $298.8 million, compared with $243.7 million in the second quarter.
Meanwhile, brokered deposits declined to $795.1 million from $891.5 million at June 30, 2026, and $834.4 million at September 30, 2025.
The reduction in brokered deposits, alongside growth in core deposits, indicates a shift toward a stronger mix of customer funding. Core deposits can provide banks with a more established funding base, although their stability and cost remain dependent on customer behavior and competitive market conditions.
Bridgewater Bancshares continues to use brokered deposits as a supplemental funding source when needed. Its overall deposit strategy is intended to support loan growth while managing funding costs and liquidity requirements.
Loan Portfolio Expands Across Commercial and Real Estate Lending
Total gross loans increased to $4.51 billion at September 30, 2026, compared with $4.43 billion at June 30, 2026, and $4.21 billion at September 30, 2025.
The quarterly increase was $80.4 million, equivalent to 7.2% on an annualized basis. Year over year, gross loans grew by $292.3 million, or 6.9%.
Growth during the third quarter was primarily driven by construction and land development loans, commercial real estate loans secured by nonowner-occupied properties, and commercial lending.
Commercial loans increased to $627.6 million, compared with $591.0 million in the previous quarter and $533.5 million a year earlier. Construction and land development loans reached $229.5 million, up from $186.2 million at June 30, 2026.
Commercial real estate nonowner-occupied loans totaled approximately $1.21 billion, compared with $1.17 billion in the second quarter. Multifamily real estate mortgage loans stood at approximately $1.66 billion, while one-to-four-family mortgage loans totaled $456.5 million.
Total real estate mortgage loans were $3.52 billion at the end of the third quarter. Net loans, after deducting the allowance for credit losses and net deferred loan fees, amounted to approximately $4.44 billion.
The loan portfolio’s expansion reflects continued demand across several commercial and real estate lending categories. However, concentration in real estate lending also makes underwriting discipline, borrower financial strength and property market conditions important factors in the company’s risk management.
Credit Quality and Provision for Credit Losses
Bridgewater Bancshares reported that overall asset quality remained strong, supported by measured risk selection, consistent underwriting standards, active credit oversight and experienced lending and credit teams.
The provision for credit losses on loans and leases increased to $2.8 million in the third quarter of 2026, compared with $550,000 in the second quarter and $900,000 in the third quarter of 2025. The company attributed the latest provision primarily to loan portfolio growth and an additional specific reserve.
The allowance for credit losses as a percentage of total loans stood at 1.28% on September 30, 2026, compared with 1.30% at the end of June and 1.34% a year earlier.
Annualized net charge-offs as a percentage of average loans rose to 0.21%, compared with 0.04% in the second quarter and 0.03% in the third quarter of 2025.
Nonperforming assets totaled $20.9 million, equivalent to 0.37% of total assets. This compared with $21.6 million, or 0.40%, in the preceding quarter and $10.0 million, or 0.19%, in the year-earlier period.
Loans with watch or special-mention risk ratings declined to $23.6 million from $38.5 million in June and $40.6 million a year earlier. Loans classified as substandard totaled $42.9 million, compared with $43.9 million in the second quarter and $58.1 million in the third quarter of 2025.
These indicators provide a mixed but important picture of credit performance: certain criticized loan categories declined, while nonperforming assets and net charge-offs remained higher than their year-earlier levels. The bank’s future performance will depend in part on borrowers’ repayment capacity, economic conditions and the effectiveness of its credit monitoring.
Operating Efficiency and Expense Management
Noninterest income reached $2.6 million in the third quarter of 2026, up from $2.3 million in the second quarter and $2.1 million in the third quarter of 2025. Higher letter of credit fees and swap fees contributed to the year-over-year increase.
Noninterest expenses totaled $21.3 million, down from $21.9 million in the previous quarter but up from $20.0 million a year earlier.
The sequential decrease reflected lower marketing and advertising costs and reduced professional and consulting expenses, partially offset by higher salaries and employee benefits. Year-over-year expenses increased primarily because of employee compensation and information technology costs.
The company reported an efficiency ratio of 48.8% for the third quarter, compared with 53.0% in the second quarter and 54.7% a year earlier. The efficiency ratio is a non-GAAP financial measure used to evaluate how much a financial institution spends to generate revenue. A lower ratio generally indicates improved operating efficiency.
Bridgewater Bancshares also reported 360 full-time equivalent employees at September 30, 2026, up from 355 at June 30, 2026, and 325 a year earlier. The increases were primarily driven by hiring for key positions across the organization.
The improved efficiency ratio suggests that revenue growth and expense discipline helped the bank generate stronger operating performance despite higher staffing and technology costs over the past year.
Capital Position and Shareholder Value
Total shareholders’ equity was $541.4 million at September 30, 2026, compared with $547.9 million at June 30 and $497.5 million a year earlier.
The sequential decline was primarily attributable to increased unrealized losses in the investment securities portfolio and preferred stock dividends, partially offset by retained net income and higher unrealized gains in the derivatives portfolio.
The year-over-year increase reflected retained earnings and gains in the derivatives portfolio, partially offset by investment securities losses, preferred stock dividends and stock repurchases.
The consolidated Common Equity Tier 1 risk-based capital ratio was 9.63% at the end of September, compared with 9.61% at the end of June and 9.08% a year earlier. This regulatory capital measure helps assess a bank’s capacity to absorb losses relative to its risk-weighted assets.
Tangible common equity as a percentage of tangible assets was 8.16%, compared with 8.62% in the second quarter and 7.71% a year earlier. Tangible book value per share was $16.33, down from $16.61 at June 30 but up from $14.93 at September 30, 2025.
The company did not repurchase any common shares during the third quarter of 2026 or the third quarter of 2025. It had repurchased 38,659 shares during the second quarter of 2026.
Bridgewater Bancshares’ third-quarter results highlight improvements in earnings, net interest margin, deposit composition and operating efficiency. The company also continued to expand its loan portfolio while maintaining a focus on credit oversight and capital management.
Management’s strategy centers on growing customer relationships, attracting core deposits, managing funding costs and positioning the balance sheet to respond to changing interest rates. The increased share of variable-rate loans may provide additional flexibility in a higher-rate environment, although changes in interest rates can also affect borrowers and overall credit performance.
The company’s continued emphasis on personalized banking services and relationship development is intended to support organic growth and long-term value creation.
While the third-quarter results demonstrate positive momentum, future performance will depend on economic conditions, loan demand, deposit competition, interest rate movements, credit costs and the bank’s ability to maintain expense discipline.
Overall, Bridgewater Bancshares closed the third quarter of 2026 with higher year-over-year earnings, stronger core deposit balances and an improved efficiency ratio. These developments support the company’s profitable growth strategy as it continues to serve commercial clients and manage its balance sheet in a changing financial environment.
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