브리지워터 뱅크셰어스(BWB) 2026년 3분기 실적 발표 컨퍼런스 콜: NIM 및 핵심 예금 성장

브리지워터 뱅크셰어스(NASDAQ: BWB)가 2026년 3분기에 한층 강화된 수익성과 균형 잡힌 자금 조달 성장을 발표했다. 사상 최대 매출과 충당금 적립 전 순이익, 지속적인 대출 금리 재조정 및 통제된 비용 집행에 힘입어 영업이익경비율이 2023년 1분기 이후 처음으로 50% 미만으로 내려갔다.

핵심 요약

• 총매출은 전년 동기 대비 20% 증가했으며, 충당금 적립 전 순이익은 사상 최고치를 기록하며 36% 증가했다.
• 순이자마진(NIM)은 대출 수익률 상승과 안정적인 예금 비용에 힘입어 2bp 확대된 3.09%를 기록했다.
• 핵심 예금은 1억 6,500만 달러(연환산 약 20%) 증가했다. 무이자예금은 6,300만 달러 증가한 반면, 브로커 예금은 9,600만 달러 감소했다.
• 이번 분기 대출은 연환산 7.2% 성장했다. 올해 누적 기준 대출과 핵심 예금은 각각 연환산 6.1%, 6.4% 증가했다.
• 자산 건전성은 전반적으로 안정적으로 유지되었으나, 부실 규모가 큰 2건의 거래처로 인해 240만 달러의 대손상각과 개별 충당금 증가가 발생했다.
• 경영진은 가정한 금리 인상 경로 하에서도 단기 대출 성장이 4~6% 수준을 기록하고 순이자마진은 비교적 안정적으로 유지될 것으로 예상하고 있다.

주요 재무 데이터

사업 및 영업 실적

핵심 예금 유치가 이번 분기의 주요 성장 동력이었다. 계절적 자금 유입 외에도 브리지워터는 자금관리 인력 채용, 신규 기업 고객 확보, 시장 변동성을 이번 증가의 원인으로 꼽았다. 조달 구조가 개선되면서 은행은 더 빠른 대출 성장을 지원하는 동시에 브로커 예금을 줄일 수 있었다.

경영진은 핵심 예금이 대차대조표 확장의 주요 제약 요인으로 남을 것이라고 밝혔다. 은행은 수익성을 희생하면서 외형 성장을 추구하기보다 대출 성장을 핵심 예금 성장 속도에 맞출 계획이다.

저소득층 주거 부문은 주요 성장 영역으로 유지되었다. 잔액은 전년 동기 대비 20% 증가해 전체 대출 포트폴리오의 16%를 차지했다. 이 부문은 3분기 대출 성장의 25% 이상, 건설 및 상공업(C&I) 포트폴리오 성장의 절반 가량을 차지했다. 경영진은 이러한 대출이 전통적인 다가구 주택이나 상업용 부동산 대출에 비해 일반적으로 더 높은 수익률과 더 큰 규모의 보상 예금 잔액을 가져온다고 설명했다.

또한 브리지워터는 대출 포트폴리오 중 변동금리 비중을 2년 전 15%에서 26%로 확대했다. 현재 은행의 변동금리 대출은 12억 달러 규모이며, 단기 금리에 직접 연동된 예금은 16억 달러다.

추가적인 금리 재조정 기회로는 가중평균 수익률 5.70%로 향후 12개월 내 만기가 도래하는 고정금리 대출 6억 9,700만 달러와, 4.23%의 금리로 재조정되거나 만기가 도래하는 변동금리 대출 1억 500만 달러가 있다.

경영진 가이던스

• 대출 성장: 경영진은 핵심 예금 모멘텀, 금리, 신규 대출 및 중도상환 활동에 따라 단기 성장이 4~6% 수준을 기록할 것으로 예상하고 있습니다.
• 순이자마진: 회사는 마진이 현재 수준 근처에서 비교적 안정적으로 유지될 것으로 예상하고 있습니다. 이 전망은 2026년 12월에 한 차례, 2027년 상반기에 두 차례의 추가 금리 인상을 가정하고 있습니다.
• 비이자비용: 4분기 비용은 예상보다 양호했던 3분기 이후 대략 2분기 수준으로 돌아갈 것으로 예상됩니다.
• 충당금 비용: 경영진은 예상 대출 성과와 부실 규모가 큰 2건의 자산에 대한 지속적인 정리 노력을 반영하여 4분기 충당금 비용이 3분기보다 약간 높을 것으로 예상하고 있습니다.
• 자본: 경영진은 이익유보금이 예상 성장을 뒷받침하는 동시에 수시 공모(ATM) 주식 발행 프로그램 및 자사주 매입과 관련된 유연성을 유지해 줄 것이라고 밝혔습니다.

리스크 및 주시 항목

금리 상승은 차주의 수익률 요건을 충족하는 거래가 줄어듦에 따라 신규 대출을 감소시킬 수 있다. 경영진은 또한 리파이낸싱 및 상환 활동이 둔화되어 신규 대출 약화를 부분적으로 상쇄할 수 있다고 언급했다.

신용 위험은 부실 규모가 큰 2건의 거래처에 여전히 집중되어 있다. 1,000만 달러 규모의 주상복합 다가구 대출은 은행이 조속한 자산 매각을 추진함에 따라 3분기 중 240만 달러의 대손상각을 발생시켰다. 860만 달러 규모의 중심상업지구(CBD) 오피스 대출은 분기 말 기준 530만 달러의 개별 충당금이 설정되어 있었으며, 경영진은 이 충당금의 일부가 결국 대손상각으로 전환될 수 있다고 밝혔다.

은행은 또한 경제적 불확실성, 인플레이션 압력, 예금 경쟁, 대출 금리 재조정과 관련된 차주의 스트레스를 모니터링하고 있다. 경영진은 지속적인 차주 점검 결과 구조적인 문제는 발견되지 않았다고 전했다.

애널리스트 Q&A 주요 내용

경영진은 최근의 금리 상승으로 인해 단기 신규 대출이 소폭 감소할 수 있지만, 이미 진행 중인 거래는 4분기에도 계속 마무리될 것이라고 밝혔다. 저소득층 주거 프로젝트는 자본 구조 공백을 메우기 위한 더 많은 대안을 가지고 있어 상대적으로 견조한 모습을 유지할 것으로 예상된다.

마진 지속 가능성과 관련해 경영진은 대출 포트폴리오의 짧은 듀레이션과 높은 변동금리 비중이 지난 금리 상승기보다 더 큰 보호 효과를 제공할 것이라고 강조했다. 2027년까지 기존 대출의 지속적인 금리 재조정이 추가 상승 여력을 창출할 수 있지만, 회사는 장기 마진 목표치를 제시하지는 않았다.

브리지워터는 기업 고객이 무이자예금 잔액과 적극적으로 관리되는 머니마켓 예금을 결합할 때 한계 자금조달 비용이 3%대 중반 수준일 것으로 추산했다. 경영진은 단기 양도성예금증서(CD) 시장, 특히 신용조합과의 경쟁을 지역 예금 금리 압력의 선행 지표로 꼽았다.

회사는 또한 도매 자금조달이 안정성과 유연성을 제공하기 때문에 부채 전략의 일부로 남아있을 것이라고 덧붙였으나, 지속적인 핵심 예금 성장으로 인해 잔액이 시간이 지남에 따라 감소할 수 있다고 언급했다.

실적 발표 콘퍼런스 콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Good morning, and welcome to the Bridgewater Bancshares 2026 Third Quarter Earnings Call. My name is Betsy, and I will be your conference operator today. [Operator Instructions] Please note that today's call is being recorded.

At this time, I would like to introduce Justin Horstman, Vice President of Investor Relations, to begin the conference call. Please go ahead.

Justin Horstman

Thank you, Betsy, and good morning, everyone. Joining me on today's call are Jerry Back, Chairman and Chief Executive Officer; Joe Chybowski, President and Chief Financial Officer; Nick Place, Chief Banking Officer; and Katie Morrell, Chief Credit Officer.

In just a few moments, we will provide an overview of our 2026 third quarter financial results. We will be referencing a slide presentation that is available on the Investor Relations section of Bridgewater's website, investors.bridgewaterbankmn.com. Following our opening remarks, we will open the call for questions.

During today's presentation, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We caution that such statements are predictions and that actual results may differ materially. Please see the forward-looking statement disclosure in the slide presentation and our 2026 third quarter earnings release for more information about risks and uncertainties, which may affect us.

The information we will provide today is as of and for the quarter ended September 30, 2026, and we undertake no duty to update the information. We may also disclose non-GAAP financial measures during this call. We believe certain non-GAAP financial measures in addition to the related GAAP measures, provide meaningful information to investors to help them understand the company's operating performance and trends and to facilitate comparisons with the performance of our peers. We caution that these disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP. Please see our slide presentation and 2026 third quarter earnings release for reconciliations of non-GAAP disclosures to the comparable GAAP measures.

I would now like to turn the call over to Bridgewater's Chairman and CEO, Jerry Back.

Gerald Baack

Thank you, Justin, and thank you for joining us this morning. In the third quarter, disciplined execution of a thoughtful strategy resulted in an incredibly strong quarter. Growth and profitability were objectives and both proved to be highlights. While we have always had the ability to generate robust loan growth, we have become more focused on creating balance sheet growth that prioritizes optimizing profitability. This strategy has never been more evident than it is now.

Earlier in the year, we saw loan competition increasing with silly pricing that we weren't willing to stretch for. In addition, we knew that historically, core deposit growth was seasonal and typically slower during the first half of the year. In response, we strategically slowed our pace of loan growth to the mid-single-digit range, accommodating for these trends.

As we expected, core deposit growth returned in the back half of the year with annualized growth of nearly 20%. This came not only from seasonality but from our new client relationships we have grown across the bank. This allowed us to accelerate loan growth during the past quarter to over 7% annualized, with loan and core deposit growth now in line on a year-to-date basis. This is a great example of how we are leveraging data, our market knowledge, balance sheet and understanding of our client base to strategically and efficiently drive the growth and profitability of the bank. Overall, this translated into a record total revenue and pre-provision net revenue in the third quarter. Combine this with a decline in noninterest expense, and we were able to move our efficiency ratio below 50% for the first time since the first quarter of 2023.

Another significant contributor to earnings was the continued growth in net interest income as ongoing loan repricing drove 2 more basis points of net interest margin expansion in the third quarter. Looking ahead, we know we are entering a new rates up environment, which Joe will speak to shortly, but we believe our balance sheet is better positioned for this environment than it has been in the past as we have been proactively growing the variable rate mix of the loan portfolio.

Our strong asset quality trends also remained a positive part of the story. As we have shared in recent quarters, we are working through 2 loans that we hope to resolve in the near term. Katie will provide more details on this later. But aside from those, we are very pleased with our loan portfolio as nonperforming assets remain well below peer levels and positive classified asset trends continue.

On Slide 5, we will show Bridgewater's long track record of consistently growing tangible book value in excess of peers. This has been the case since before we went public in 2018 and even more recently since 2021. On a year-over-year basis, we have grown tangible book value at a 9.4% pace. Delivering shareholder value is key at Bridgewater.

Overall, the third quarter was a very good quarter for Bridgewater. I'm thrilled with the momentum we have created, and I'm optimistic of the outlook for the remainder of 2026 and beyond. The team is incredibly strong and knows how to execute on the strategies we have in place.

With that, I'll turn it over to Joe.

Joseph Chybowski

Thanks, Jerry. Slide 5 highlights one of the key themes of the quarter, our improving profitability. This included record pre-provision net revenue, which was up 36% year-over-year as well as continued improvements in return on assets and return on average tangible common equity. Much of this profitability momentum continues to be driven by strong revenue growth, which was up 20% year-over-year. The revenue growth came from both net interest income, which I'll talk more about on the next slide, as well as solid noninterest income growth driven by higher letter of credit fees. Swap fees were a bit lighter in the third quarter as swap pricing dynamics are less favorable in the current rate environment.

Turning to Slide 6. Net interest income growth of 22% annualized in the third quarter once again came from both higher average earning assets, up 16% annualized and net interest margin expansion. As expected, the pace of net interest margin expansion slowed from the second quarter, but was still up 2 basis points to 3.09% as the loan portfolio continued to reprice higher, while deposit costs remained relatively stable. Overall, margin expansion has exceeded our expectations as we originally didn't expect to hit 3% until the fourth quarter of this year. Essentially operating above 3% for the majority of the year has been a boost to our overall profitability.

Looking closer at the net interest margin drivers on Slide 7, loan yields were up another 5 basis points to 5.96% as the portfolio continued to reprice higher, with average new production yields in the third quarter in the mid-6s. While loan yields moved higher, deposit costs of 2.78% remained relatively stable for the third consecutive quarter. The question now is what happens to the net interest margin going forward, given the recent rate hike and potential for more going forward.

The most important thing to know is that we are better positioned today for a rates up environment than we have been in the past. Over the past couple of years, we have been proactively increasing the mix of variable rate loans on the balance sheet to create additional repricing opportunities and be more rate neutral. Today, variable rate loans make up 26% of the portfolio, up from 15% just 2 years ago. This means we now have $1.2 billion of variable rate loans, which offsets much of the $1.6 billion of deposits directly tied to short-term rates. So while we expect Fed rate hikes to push deposit costs higher across the sector, we also expect our loans to continue to reprice higher and not just from the higher variable rate mix but also because of the ongoing back book repricing.

We have $697 million of fixed rate loans scheduled to mature over the next 12 months at a weighted average yield of 5.70% and another $105 million of adjustable rate loans repricing or maturing at 4.23%. 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.

Given this loan repricing, we expect our net interest margin to hold relatively stable over the near term despite the recent rate hike. This also assumes another rate hike in December and two more in the first half of 2027. This demonstrates how much better we are positioned today, considering the margin compression we saw during the last rates up cycle. With continued loan growth and margin stability, we are well positioned for ongoing net interest income growth in the quarters ahead.

Turning to Slide 8. We have always operated the business in a highly efficient manner given our branch-light model and CRE focus. With the recent revenue momentum I just talked about, coupled with well-controlled expenses in the third quarter, our efficiency ratio once again dropped below 50% for the first time since the first quarter of 2023. After pulling forward some expense early in the year due to M&A-related talent acquisition opportunities, we expected to be able to hold third quarter expenses in line with second quarter. However, we outperformed this as expenses came in even lower.

Looking ahead to the fourth quarter, we would expect noninterest expense to return to that second quarter level. Overall, lower expenses in the third quarter translated to increased operating leverage given our strong revenue growth. We have a proven track record of being able to manage expenses effectively, and we expect to be able to continue to do this going forward, while still investing in the business with a focus on driving further positive operating leverage.

With that, I'll turn it over to Nick.

Nicholas Place

Thanks, Joe. Turning to Slide 9. I think the biggest highlight of the quarter for us was the $165 million or 20% annualized core deposit growth we generated. Over the past couple of years, we've developed a much better understanding of our core deposit flows and seasonality. So while growth was more muted in the first half of the year, we expected it to return in the back half of the year, and that's exactly what we saw. But the growth was not just seasonality. We have made key hires within our treasury management team, taken advantage of marketplace disruption and brought in deposits from new client relationships.

This has also helped improve our overall deposit mix as noninterest-bearing deposits increased $63 million, while higher cost brokered deposits declined $96 million. A lot of credit goes out to our treasury team for providing such a high level of insight into our asset and liability management and making sure our bankers know what we need from a funding standpoint to support our growth. We are seeing this translate to better relationship margins and increased profitability for the bank. We have -- as we have demonstrated, we have the ability to grow loans as much as we want, but it's really the core deposits that are the governor, and we were very pleased with what we saw in the third quarter.

Given the core deposit growth, we generated stronger loan growth in the third quarter with balances up 7.2% annualized, as you can see on Slide 10. We have made it clear that we want to grow the loan portfolio in line with core deposits over time. On a year-to-date basis, loan balances are up 6.1% annualized, while core deposits are up 6.4%. This demonstrates disciplined execution from our teams as we focus on generating profitable growth across the bank. As we think about the loan growth outlook from here, core deposits will continue to be a governor, but there are other factors as well, including the interest rate environment, which we expect to have an impact on both origination and payoff activity.

Looking at Slide 11. New loan production was stronger in the third quarter with increased loan originations and advances more than offsetting the elevated levels of payoffs. We are still seeing strong loan demand across our verticals. But with interest rates moving higher, we are starting to see fewer deals penciling out as we remain disciplined on pricing. We anticipate new origination activity could slow a bit from here. However, on the other side, higher rates mean that payoff activity could slow as well. Overall, we expect near-term loan growth in the mid-single-digit range as we navigate this higher rate environment and continue to emphasize profitable growth.

Turning to Slide 12. The majority of the loan growth we saw in the third quarter came from the construction, nonowner-occupied CRE and C&I portfolios. Multifamily balances declined during the quarter due to some elevated payoff and refinance activity in that portfolio. Overall, our affordable housing vertical continues to play a big role in our growth story, accounting for about half of the growth we saw across the construction and C&I portfolios.

As you can see on Slide 13, we remain focused on growing our presence in the affordable housing space, which has resulted in 20% year-over-year growth. Affordable housing made up over 25% of our loan growth in the third quarter and currently makes up 16% of the total loan book today. These loans tend to be higher yielding than traditional multifamily or CRE loans given their complexity and also tend to come with higher levels of compensating deposit balances. This is a high barrier to entry vertical, where we have established a differentiated level of expertise within the various parts of the transactions we tend to support. Our growing client base is strong as we work with several of the largest affordable housing developers across the country. As a result, we see a lot of growth runway, both locally and nationally within this segment.

With that, I'll turn it over to Katie.

Katie Morrell

Thanks, Nick. As Jerry mentioned earlier, our asset quality profile remains strong. Starting on Slide 14, our watch and special mention loans continued to decline during the quarter and are now down approximately 50% from year-end 2025 and represent just 0.5% of total loans. Substandard loan levels have also improved year-over-year and have remained stable over the last several quarters. We view these credit migration trends as an important leading indicator of overall portfolio health and their continued improvement reflects both the strength of our underwriting discipline and our proactive approach to portfolio risk management.

Turning to Slide 15. Our nonperforming assets declined modestly from last quarter, ending the period at 37 basis points and remaining well below peer levels. As we have discussed over the past couple of quarters, our nonperforming assets remain concentrated in 2 larger relationships. The first is a $10 million mixed-use multifamily property that moved to nonaccrual last quarter. We previously had $1 million specific reserve on this loan. However, as we advanced our workout strategy and move towards a near-term sale of the asset, we ended up taking a $2.4 million charge-off during the third quarter. This charge-off was the primary driver of the uptick in annualized net charge-offs this quarter to 0.21%.

The second larger NPA is the $8.6 million Central Business District office loan that has been on nonaccrual since the first quarter of 2025. During the third quarter, we further increased the specific reserve on this loan to $5.3 million, reflecting our latest assessment of the underlying collateral value. We are still working toward a resolution of this asset as quickly as possible, and we would expect that some portion of the existing reserve could ultimately migrate to charge-offs as we execute on this strategy.

Given the additional specific reserve and stronger loan growth, we booked a higher provision in the third quarter. However, our total allowance actually decreased a couple of basis points to 1.28%. We believe the allowance appropriately reflects the risk profile of the portfolio, including the specific reserves associated with these 2 larger relationships and our constructive outlook on the broader loan portfolio.

Looking ahead, we expect provision expense to be a bit higher in the fourth quarter than it was in the third as we continue working toward resolution of these credits while supporting expected loan growth. We are also watching closely for signs of weakness related to economic uncertainty, inflationary pressures and repricing risk related to the rise in interest rates. We implemented a very effective process during the last rates up cycle to proactively engage with clients well in advance of any repricing, and this process remains ongoing today. So far, these conversations are going well, and we have not identified any systemic issues.

Overall, we remain confident in the quality of our portfolio, the strength of our underwriting and our borrowers and our ability to navigate the remaining problem assets. I'll now turn it back over to Joe.

Joseph Chybowski

Thanks, Katie. Slide 16 highlights our stable capital position, which continues to be supported by our retained earnings. Notably, our CET1 ratio has increased 55 basis points year-over-year to 9.63%. We did not repurchase any shares in the third quarter.

Turning to Slide 17, I'll recap our near-term expectations. On the loan side, we expect mid-single-digit growth. Of course, this will continue to be dependent on our core deposit momentum over time as well as the uncertainty around interest rates and the impact that has on our new originations and payoffs. We expect the net interest margin to hold relatively stable at current levels over the near term, even assuming an additional rate hike in December and two more in early 2027. This is driven by our balance sheet being better positioned today than it was during the last cycle with more loan repricing opportunities offsetting higher deposit costs.

After a better-than-expected expense quarter, we look for fourth quarter noninterest expense to be similar to second quarter levels. We also expect provision expense in the fourth quarter to increase from what we saw in the third quarter, given our loan growth and continued progress on resolving our 2 larger nonperforming assets.

I'll now turn it back over to Jerry.

Gerald Baack

Thanks, Joe. Before we open up for questions, I want to provide a quick update on our 2026 strategic priorities. Profitable growth is where we have been focused, and we believe it is having an impact. Aligning loan and core deposit growth has allowed us to drive net interest margin expansion while we continue to capture market share. Not only are we adding clients, but we also added 17 talented individuals to our team as a result of the M&A disruption.

Nick spoke of the momentum we have seen in the affordable housing space with balances up 17% annualized year-to-date. Finally, we have advanced to the execution phase of our AI strategy focused on responsibly enabling our teams to achieve efficiencies across the organization. This includes establishing oversight, security and risk frameworks, pushing out tools to our teams and leveraging partnerships to help operationalize use case and workflows. We are still early in the process, but the benefits are becoming apparent.

With that, we'll open it up for questions.

Operator

[Operator Instructions] The first question today comes from Jeff Rulis with D.A. Davidson.

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Jeff Rulis

Just a question on the -- I know Nick and Katie, you talked about the impact of higher rates on both demand and -- hoping to get a little more detail on that, if you could -- particularly if we get 1 or 2 more hikes. Just if you could touch on the demand expectations as well as Katie, I don't know if you walk through some of those maturity repricing schedules should we get another 1 or 2 hikes?

Nicholas Place

Jeff, yes, this is Nick. I think in the real near term, the recent rates up move will impact our loan origination activity slightly. I think there's always some sort of delayed momentum that will continue to push some transactions over the finish line here in the fourth quarter that were well underway in the third quarter.

Long term, I think it's really just dependent on what happens in the belly of the curve there. I mean we're up quite a bit since the beginning of the year, and our borrowers are pretty resilient on working through what that does to their capital stacks. But over the course of time, that will cause more and more transactions to not pencil out. I think what we saw in the last rates up move is that impact to loan origination activity was certainly offset by the refinance and payoff activity. So where there's a headwind on the new origination side, I think there's a bit of a tailwind on the payoff side.

So we still feel really good about our loan demand overall. Our affordable housing segment, as we talked about, is contributing to a larger and larger percentage of the growth every quarter. And there's seemingly more avenues to plug those holes and capital stacks on those transactions than there is maybe in market rate deals. So we expect to continue to see a lot of opportunity within that space even in this higher rate environment.

So we still feel good about it, but we're certainly watching what those rates are doing as it relates to deals sort of spinning out of our pipeline.

Katie Morrell

And then as far as -- yes, Jeff, this is Katie. So as far as repricing credit risk is concerned, like I mentioned in the prepared remarks, we haven't really stopped our repricing analysis process over the last couple of years. So feeling good about that, especially as we go through covenant testing and looking ahead 12 months out, if there's a repricing event, how does that look for property performance.

So I think we do have a really good handle on any of the specific loans that would be affected and have action plans in place. So while these rate hikes are going to make performance more challenging in some instances, I don't think we have any big surprises.

Jeff Rulis

Appreciate it. And maybe just one back to the margin, Joe. We've kind of got to this goal quicker than we had thought. And I guess the bigger picture, 3 or 4 years ago, the margin was at 3.50%. Just want to kind of feel that out of sort of the terminal level. I know we're about near term and then longer term, but the ability to grind higher on the margin and you said the balance sheet has changed. Just any more detail about expectations, maybe a little [indiscernible] on the margin to kind of frame up how you maybe get back to the mid-3s or not would be helpful.

Joseph Chybowski

Yes, Jeff, this is Joe. So I think we -- I mean, high level, we've been really pleased with the margin, as you said, and you highlighted the performance this year. And ultimately, the conviction that we feel to have margin stability going into a potentially higher kind of rates up cycle. I think it's -- you're always reminded of 90 days ago, we had Fed funds probabilities with a cut in December and a 4.30% 10-year. And we fast forward 90 days and we not only got a hike, we have 3 more hikes anticipated, and we have a 5.30% 10-year.

So I think a lot has obviously changed over the last 90 days. But that being said, I mean, I think we're -- like I said, we're really pleased and encouraged with the durability and stability of the margin. And I think to your point, a lot of that's been worked over the last couple of years of really reorienting the portfolio on the loan side to be more variable rate to really match with the variable rate deposit book. And I also think just the duration of the loan portfolio has shortened as well, almost 12 months from kind of the peak in 2022. So I think there's been a lot of work there to really be more balanced and then to be able to kind of weather both rates up and rates down.

So I think the dynamics of like just the incremental loans that come on relative to the incremental cost of funds, I think that also gives us optimism, to your point, on if loans come on the books today in the mid-6s, as we said, with upside potential given where rates have gone and incremental cost of funds come on in the mid-3s, I think the margin itself, we feel good about the stability that can take place. And ideally, the back book loan repricing that continues throughout '27 gives us potential upside.

So I think those are the dynamics, the puts and takes. But generally, I think we're really pleased with where we're at and especially in light of what's transpired over the last 90 days.

Operator

The next question comes from Brendan Nosal with Hovde.

Brendan Nosal

Maybe starting off here on capital. Good quarter for growth, a bit of AOCI drag, although not as much as most. If I look at your tangible capital ratio, down from 8.60% to 8.15% or so, does that kind of change the likelihood of you tapping the ATM versus 3 months ago as you look forward towards mid-single-digit growth? Or do you think you can generate enough capital internally for the time being where you're still kind of reserving optionality, but not leading one way or the other, the ATM versus buyback?

Joseph Chybowski

The latter part of your question, Brendan, I think, is the way to put it. I think as we've said, I mean, optionality is always our goal. And so I think while TCE is down quarter-over-quarter, I do think when we think about the growth prospects of the company and how we think about the loan growth to Nick's comments, we certainly feel like we can self-generate the capital to support the growth and then also have the optionality on both sides, given the buyback and given the ATM. So I think nothing changes from that perspective.

Brendan Nosal

Okay. Perfect. And maybe kind of circling to growth, 6% annualized growth so far this year, both for core funding and for loans, calling for mid-single-digit growth in the near term. Does that kind of feel like the new steady state for you guys just in terms of how fast you can grow core funding, which is a strong pace and then that just happens to be the pace we should be on average looking for loan growth from here?

Nicholas Place

Brendan, this is Nick. Yes, I feel like especially in this current interest rate environment, that feels like the right run rate for us. I mean, to the extent that we get more accommodating fiscal policy that could allow us to potentially grow at a faster pace. But with what we're seeing today and what we're seeing in the market for opportunities, we're trying not to grow just for the sake of growth. I think we're trying to be really disciplined about growing as profitably as we can. And that's kind of where we're landing in that sort of mid-single digit on both sides.

Operator

The next question comes from Nathan Race with Piper Sandler.

Nathan Race

Going back to the last discussion topic around growth on the right side of the balance sheet, obviously, really impressive core deposit gathering in the quarter. I'm just curious to what extent you guys have visibility into kind of the core deposit gathering pipeline and to what extent continued success on that front can maybe help wind down some of the higher cost funding that's maturing over the next 12 -- or over the course of 4Q and into 2027.

Nicholas Place

Yes. Nate, this is Nick. Yes, I mean, we feel really good about what we saw in the third quarter and frankly, how we're positioned on a go-forward basis. We've been able to pick up really amazing talent in the market on the treasury management side of things. We picked up great commercial bankers in market. Our affordable housing vertical continues to build both loan opportunities and core deposit opportunities. We've been really pleased with what that team has been able to do to gather core deposits outside of the Minneapolis-St. Paul market through new relationships that are national affordable housing developers.

So we feel really good about our prospects to continue to grow core deposits. As we talked about earlier in the prepared remarks, I mean, we've done a lot of time to really evaluate and understand our deposit flows and our balance sheet. So we do tend to see more core deposits build in the back half of the year. So there's always some tailwind for us there. But I don't want to take away from the great work that the teams are doing to not only bring in new relationships, but expand existing ones and take advantage of the opportunity in front of us.

So the core deposits will continue to be the governor for us as we think about loan growth, but our teams are doing a phenomenal job to build a really strong pipeline of new relationships and new deposits.

You mentioned brokered and the sort of wholesale funding side. I mean that's always going to be a part of the equation for us as we think about managing our overall liabilities. It's a really stable funding source. There's optionality within that portfolio that we can't get elsewhere. So we have -- we are trying to be disciplined about our growth and to allow us optionality to reduce those over time, but it will always be part of the story.

Nathan Race

Got it. That's helpful, Nick. And just curious on the payoff front. I mean, any sense in terms of kind of what inning you're in, in terms of maybe some of the lower-yielding commercial real estate loans originated 4 or 5 years ago when rates are lower, kind of nearing the end and maybe payoffs are going to be kind of less of a headwind as we can see in the chart on Slide 11 in the deck.

Nicholas Place

Yes. I mean it's been a pretty dynamic environment over the last 90 days. I think conversations that we have with clients around what they were expecting to do with their property 90 days ago, there's maybe more certainty of them either refinancing to an agency type debt on a piece of a multifamily property or just selling the property just because interest rates were attractive enough for a new buyer. Some of those clients are now sort of reevaluating if that makes sense, just given pricing guidance that they're getting from brokers on what they could get in the sale given the rates up move.

I think the nice thing, and Katie mentioned this, these clients have had a lot more time to think about and plan for this repricing than clients in 2023 that saw really rapid rates up move and that they weren't expecting. So we feel good about the ability to work through any of those credit issues. And I think our clients are much more prepared today, even if they do have to sit on the -- and let the loan reprice or we provide extensions on those credits and the deal doesn't pay off. They just feel better about that, the prospects for that transaction than some of the conversations we were having in 2023.

Nathan Race

Okay. Got it. And if I could just sneak in one more confirmation for Joe. I think you alluded to kind of incremental cost of deposits coming in the door are at 3.5% today. Just want to confirm that, that's kind of what you're seeing here or at least what happened in 3Q? And then kind of where do you see that going over the next few quarters if we do get additional rate hikes just based on some of the competitive dynamics in the Twin Cities?

Joseph Chybowski

Yes. I mean I think that's a decent estimate, Nate. I think when we couple kind of commercial relationships with a noninterest-bearing deposit with a more actively managed money market, I think that's kind of how we think about the incremental cost of funds. I do think that kind of the leading indicator of kind of deposit competition locally is always the short-term CD market, primarily credit union driven. So I think we have seen some marketing related to that. So I think that's part of how we think about deposit cost competition potentially picking up just on the short end of the curve.

But to Nick's point, we feel really good about the ability to continue to grow kind of whole commercial relationships that are not just kind of chasing the highest rate.

Operator

[Operator Instructions] The next question comes from Brandon Rud with Stephens.

Brandon Rud

If I could start, just one on the expenses in the third quarter and kind of expectations for the fourth quarter. I guess what drove the outperformance here in 3Q? And then what's going to contribute to the step-up as we look towards the fourth quarter here?

Joseph Chybowski

Brandon, it's Joe. Yes, I think like when we talk about expenses on a quarter-over-quarter basis, we never try to get too in the weeds on one category versus the other, but more just think about generally a full year. And so I think our priorities continue to be investing in people and technology. And as Jerry mentioned, Nick mentioned, we've -- we felt like we've had tremendous success attracting top talent in the market, and we're always going to prioritize that. But I also think the technology investments we've made certainly continue to bear fruit and pay off and make -- allow our people to be more efficient.

So I think those are the priorities. I think when we think about expense growth on a go-forward basis, not quarter-over-quarter, but over a long term, the range of NIE to average assets is always a decent way to think about it. But ultimately, I think we're most focused on the continued positive operating leverage that we saw here quarter-over-quarter to see 20% year-over-year revenue growth, 10% year-over-year expense growth. I mean that's certainly a dynamic that we continue to prioritize and are confident we'll continue to see as we head into '27.

Brandon Rud

Got it. Okay. And then I think maybe I heard this wrong. Katie, did you say that the provision here in the fourth quarter may be a bit higher than 3Q? And if so, should we interpret that as maybe incremental charge-offs in 4Q? Or would that be to fill the reserve and kind of see a step-up in the ACL ratio?

Katie Morrell

Yes, Brandon, that was the comment in the prepared remarks that we expect fourth quarter to be a bit higher than we saw in the third. Obviously, this is an elevated level from our historical run rate. But we are actively working through these nonperforming assets. So we're just working through them as quickly as possible, and we do anticipate that some of those reserves that we're holding on those loans could migrate to charge-offs and then couple that with the expected loan growth in the fourth quarter, we see that the provision would be slightly elevated.

Brandon Rud

Got it. Okay. Maybe if I could squeeze one more in. I think the security yield this last quarter was just over 5%. I guess -- thanks for the comments on the loan repricing side of things. I guess how much left -- sorry, how much opportunity is left on the securities repricing side as well that could maybe help the NIM over the medium term?

Joseph Chybowski

Yes, Brandon, this is Joe. I think ultimately, I mean, the increase in the securities yield is less about kind of portfolio roll-off and repricing and more about just incremental purchases. So I think with the move up in rates, we certainly saw real opportunities to add to the portfolio, specifically in the tax-exempt municipal space. So that certainly drove higher interest income. It also drove a lower tax rate here in 3Q relative to 2Q.

So I think we'll continue to be opportunistic in the investment portfolio as we kind of balance loan growth, core deposit growth and then ultimately, securities purchases. But I will say the environment with the move in rates up, securities can be a real alternative just given levels that you can add today in really high-quality credits.

Operator

This concludes our question-and-answer session. I would now like to turn the call back over to Jerry Back for any closing remarks.

Gerald Baack

Thanks, everyone, for joining our call today. We're very excited here at Bridgewater about our profitability outlook and our growth outlook and very well positioned to finish 2026 strong and optimistic about 2027. I want to say thanks again to our phenomenal team members here at Bridgewater.

Everybody, have a great day. Thank you.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.