Bridgewater Efficiency Ratio Falls Below 50% After Deposit Reversal

The Tip Desk · October 22, 2026 · 4 min read

Core deposits rose $165.3 million, or 19.6% annualized, while net interest income reached $40.7 million and the efficiency ratio printed 48.8%.

Bridgewater Bancshares, Inc. (BWB), the St. Louis Park, Minnesota-based parent of Bridgewater Bank, posted net income of $15.0 million, or $0.49 a share, for the third quarter of 2026, as core deposit growth reversed a second-quarter decline and the efficiency ratio fell below 50% for the first time since the first quarter of 2023.

The Twin Cities lender’s efficiency ratio improved to 48.8% from 53.0% in the second quarter, after a decline from 56.3% in the first quarter. Chairman and Chief Executive Officer Jerry Baack said across-the-board revenue growth and controlled expenses produced a meaningful increase in pre-provision net revenue, which rose $2.9 million, or 60.4% annualized, from the second quarter.

Net interest income was $40.7 million, up $2.1 million, or 21.5% annualized, from $38.6 million in the second quarter, after a $1.9 million, or 21.0% annualized, increase in the prior quarter. The company said the linked-quarter gain came from growth in the loan and investment securities portfolios at higher yields and higher cash balances, offset partially by higher deposit balances.

Net interest margin on a fully tax-equivalent basis expanded 2 bps to 3.09% from 3.07%, after an 8 bps expansion in the second quarter. Core net interest margin, which excludes loan fees and purchase-accounting accretion from the First Minnetonka City Bank acquisition, rose 4 bps to 2.98% from 2.94%. The company attributed the margin expansion primarily to growth and repricing of the loan and investment securities portfolios at higher yields.

The aggregate loan yield rose 5 bps to 5.96% from 5.91%; core loan yield rose 6 bps to 5.82% from 5.76%. Interest expense was $36.0 million. The cost of total deposits fell 2 bps to 2.78% from 2.80%, which the company attributed to lower rates on brokered deposits and an increase in noninterest-bearing deposits.

Gross loans increased $80.4 million, or 7.2% annualized, to $4.51 billion at September 30, 2026, after a $58.3 million, or 5.4% annualized, increase in the second quarter. Growth was led by construction and land development, commercial real estate nonowner occupied, and commercial loans. Construction and land development loans were $229.5 million, up from $186.2 million at June 30. CRE nonowner occupied loans were $1.21 billion. Commercial loans were $627.6 million. Multifamily loans were $1.66 billion.

Total deposits increased $126.8 million, or 11.6% annualized, to $4.47 billion, after a $40.7 million, or 3.8% annualized, increase in the second quarter. Core deposits, defined as total deposits less brokered deposits and certificates of deposit greater than $250,000, rose $165.3 million, or 19.6% annualized, reversing a $29.9 million, or 3.5% annualized, decline in the second quarter. Noninterest-bearing transaction deposits increased $62.9 million, or 30.0% annualized, to $893.8 million. Brokered deposits decreased $96.4 million to $795.1 million. The loan-to-deposit ratio was 100.8%.

Noninterest income was $2.6 million, up $249,000 from $2.3 million, primarily on higher letter of credit fees, offset partially by lower swap fees. Noninterest expense decreased $553,000 to $21.3 million, on lower marketing and professional costs, offset partially by higher salaries. Full-time equivalent employees were 360, up from 355.

The provision for credit losses on loans rose to $2.8 million from $550,000, which the company attributed to loan growth and an additional specific reserve. Annualized net charge-offs to average loans were 0.21%, up from 0.04%. The allowance for credit losses to total loans was 1.28%. Nonperforming assets to total assets declined to 0.37% from 0.40%. Watch/special mention loans fell to $23.6 million from $38.5 million; substandard loans fell to $42.9 million from $43.9 million.

The Common Equity Tier 1 risk-based capital ratio was 9.63%, up from 9.61%. Tangible common equity to tangible assets was 8.16%. Tangible book value per share was $16.33, down 6.7% annualized from $16.61. The company said the linked-quarter decrease in shareholders’ equity was primarily due to higher unrealized losses in the securities portfolio and preferred dividends. The company repurchased no common shares in the third quarter, after buying 38,659 shares for $700,000 in the second quarter; $12.4 million remained under the authorization.

Baack said the balance sheet is better positioned for a higher interest-rate environment given an intentional mix shift toward more variable-rate loans over the past few years.