Bridgewater Bancshares (NASDAQ:BWB) executives said the company ended 2025 with “a successful quarter” marked by strong loan and core deposit growth, net interest margin expansion, higher fee income, and controlled expenses, while maintaining what management described as a strong credit profile.
Margin expansion and revenue growth
Chairman and CEO Jerry Baack said the bank finished the year “strong” and highlighted a 12-basis-point increase in net interest margin to 2.75% in the fourth quarter. President and CFO Joe Chybowski attributed the expansion primarily to lower deposit costs following three Federal Reserve rate cuts in late 2025.
On the funding side, Chybowski said deposit costs fell 22 basis points to 2.97% in the fourth quarter. He noted that at year-end the bank had $1.8 billion of funding tied to short-term rates, including $1.4 billion of immediately adjustable deposits, which allowed repricing lower after the September, October, and December 2025 rate cuts. He added deposit costs could move “a bit lower” in the first quarter as the full impact of the December cut is recognized, but absent further cuts, costs are expected to stabilize.
On the asset side, Chybowski said loan yields held steady in the fourth quarter despite recent rate cuts, citing upcoming repricing opportunities. He pointed to $637 million of fixed-rate loans scheduled to mature over the next 12 months at a weighted average yield of 5.55%, plus $106 million of adjustable-rate loans repricing or maturing at 3.84%. He said new originations in the fourth quarter were being booked in the “low to mid-6s,” creating additional upside. The bank has also increased the variable-rate portion of its loan book to 22% from 14% a year earlier.
Fees, expense discipline, and profitability metrics
Chybowski said total revenue increased 32% year-over-year and that adjusted return on assets was “just under 1%” in the fourth quarter. Non-interest income improved in the quarter due to higher swap fees and letter of credit fees. After recording no swap fee income in the third quarter, the bank generated $651,000 in swap fee income in the fourth quarter. Chybowski described swap fees as “quite lumpy” due to timing and transaction size, and said management expects swap fees to remain part of the revenue mix in 2026, but likely to “slow a bit” given the yield curve and current environment.
Expenses were “well controlled” in the fourth quarter, according to Chybowski, who said 2025 expense growth had been elevated due to work tied to the First Minnetonka City Bank systems conversion completed in the third quarter. In the fourth quarter, expenses excluding merger-related items rose 9.5% on an annualized basis, which he said was more in line with expected asset growth. The adjusted efficiency ratio declined to 50.7%, the lowest level since the first quarter of 2023. Chybowski also said Bridgewater exceeded its 30% cost savings estimate for 2025 related to its recent acquisition.
Deposit and loan growth, including affordable housing traction
Chief Banking Officer Nick Place said core deposit growth remained a key strength, with annualized growth of 8.8% in the fourth quarter and 7.9% for the full year. He highlighted improved deposit mix, including a $100 million increase in non-interest-bearing deposits during the quarter and a decline in brokered deposits.
In response to an analyst question, Place said the fourth quarter is “seasonally” strong for Bridgewater, with some balances typically building late in the year and “trickl[ing] out in Q1.” He said the bank expects first-half 2026 core deposit growth to be less linear, and that it may supplement with brokered deposits if needed, consistent with prior practice.
On the lending side, Place said loan balances grew 8.9% annualized in the fourth quarter and 11.4% for the full year, supported by a “robust” pipeline and continued demand. Looking ahead, he said management believes it can maintain loan growth in the high single digits in 2026, with the pace influenced by core deposit growth and loan payoff levels.
Place said construction lending was the largest driver of fourth-quarter growth as projects initiated over the past year began funding, with affordable housing a meaningful contributor. He said affordable housing balances increased $41 million in the fourth quarter, or 27% annualized, and rose 29% for the full year 2025 across construction, C&I, and multifamily portfolios. In the Q&A, Place said affordable housing is roughly 15% of the loan book and that the bank expects this segment’s growth to outpace overall portfolio growth in the near term, though management has not set a specific concentration limit.
Credit quality, capital, and 2026 priorities
Chief Credit Officer Katie Morrell said the multifamily portfolio continues to perform well and noted that since the bank’s founding in 2005 it has recorded $62,000 in net charge-offs within that portfolio. She also cited Twin Cities multifamily fundamentals she described as positive, including declining vacancy rates through 2025, fewer concessions, increased rent growth, and higher sales volume in the back half of the year. Office exposure remains “limited,” she said, at just under 5% of total loans and concentrated primarily in suburban Twin Cities locations.
Morrell said non-performing assets rose modestly to 0.41% of assets, driven by a multifamily loan moving to non-accrual after a purchase agreement fell through; she said the property is now under a new contract, supporting confidence in a near-term resolution. The company recorded $1.2 million in net charge-offs in the quarter related to a fully reserved C&I loan, though Morrell said full-year net charge-offs were 0.04% of average loans. The allowance ratio declined slightly to 1.31% from 1.34%. She characterized the drivers of the fourth-quarter uptick in NPAs and charge-offs as isolated issues following an extended period of very low problem assets. Classified loans were 1.3% of total loans and 8.3% of capital, with watch and special mention loans “just over 1%” of the loan book.
Chybowski said capital levels remain “comfortable,” with the CET1 ratio increasing to 9.17% from 9.08%. The bank did not repurchase shares during the quarter, citing organic growth opportunities and the stock’s trading level, and ended the year with $13.1 million remaining under its current repurchase authorization.
For 2026, management reiterated several expectations and priorities discussed on the call, including:
- High-single-digit loan growth, with a targeted loan-to-deposit ratio of 95% to 105%.
- A path to a 3% net interest margin by year-end 2026 without assuming additional rate cuts.
- Expense growth returning to a pace aligned with asset growth after elevated spending tied to the 2025 acquisition conversion.
- Strategic focus on profitable growth, Twin Cities market share gains, expansion in targeted verticals (including nonprofits and SBA), and continued build-out of the affordable housing platform locally and nationally.
- Further technology leverage, including a more formal strategy around AI and ongoing work to modernize the bank’s core banking stack.
Baack also provided operational updates, including the closure of one branch acquired through First Minnetonka City Bank due to proximity to other locations, and said the bank saw “very little deposit attrition” following the merger. He said Bridgewater plans to open a new branch in Lake Elmo “next month.” Baack added the bank continues to see talent and client opportunities stemming from Twin Cities banking M&A disruption, including Old National’s acquisition of Bremer and pending deals involving MidWestOne and American National. He said Bridgewater is now the “second-largest locally led bank in the Twin Cities.”
On potential acquisitions, Baack said the bank continues to speak with local bank owners and remains interested in opportunities similar to First Minnetonka City Bank, while emphasizing that organic growth remains the primary focus.
About Bridgewater Bancshares (NASDAQ:BWB)
Bridgewater Bancshares, Inc is the bank holding company for Bridgewater Bank, a New Jersey-chartered community bank founded in 2006. Headquartered in Bridgewater, New Jersey, the company provides a broad array of financial services designed to meet the needs of both individual and business customers. As a locally focused institution, Bridgewater Bancshares emphasizes relationship banking, combining personalized service with the efficiency of modern banking technologies.
The company’s retail banking platform offers checking and savings accounts, certificates of deposit, money market accounts and consumer loan products.
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