Summary of Bridgewater Bancshares Q1 2026 Earnings Call

1Key Financial Results and Metrics:

Net Interest Margin (NIM): Expanded to 2.99%, nearing the 3% target previously set for year-end 2026.

Net Interest Income: Grew by 3% quarter-over-quarter despite a $185 million decline in average interest-earning assets.

Loan Portfolio Growth: Increased by 5.5% annualized.

Core Deposits: Grew by 3.2% annualized, with a positive shift in deposit mix.

Tangible Book Value: Increased 9.9% annualized to $15.93 per share.

Capital Ratios: Common Equity Tier 1 (CET1) ratio rose to 9.53%, up 36 basis points.

2Strategic Updates and Business Highlights:

Balance Sheet Management: Executed strategic sales of securities, generating a total gain of $7.3 million in pretax net income, enhancing balance sheet efficiency.

Branch Expansion: Opened a new branch in Lake Elmo, targeting growth in an underserved market.

Focus on Affordable Housing: Continued commitment to affordable housing resulted in a 35% annualized increase in related loan balances.

Talent Acquisition: Hired new C&I bankers to capitalize on M&A disruptions in the market, enhancing growth prospects.

3Forward Guidance and Outlook:

Loan Growth: Expected to achieve high single-digit growth for the year, contingent on core deposit growth and competitive dynamics.

NIM Outlook: Anticipates slow additional margin expansion moving forward, with no further rate cuts expected in 2026.

Expense Management: Noninterest expenses expected to align with asset growth over time, despite a seasonal increase in Q1.

4Challenges and Points of Concern:

Balance Sheet Shrinkage: The decline in average interest-earning assets due to strategic sales of securities could impact future net interest income.

Competitive Pressures: Increased competition in the lending market may tighten spreads, affecting profitability.

Market Conditions: Geopolitical factors have slowed M&A discussions, which could limit growth opportunities.

Seasonal Deposit Fluctuations: Typical seasonal outflows in deposits could pose challenges in maintaining growth momentum.

5Notable Q&A Insights:

Capital Strategy: Management expressed comfort with current capital levels but emphasized the optionality provided by an at-the-market offering for potential future capital needs.

Hiring Impact: New hires from competitors are expected to enhance deposit gathering and client relationships, particularly in the C&I sector.

Loan Portfolio Dynamics: The multifamily portfolio's slower growth in Q1 was attributed to typical quarter-to-quarter variability rather than a broader trend, with a strong pipeline for future growth.

Deposit Costs: Competitive deposit pricing remains a challenge, but management is optimistic about the ability to attract core deposits at lower costs. Overall, Bridgewater Bancshares reported a strong start to 2026, marked by significant margin expansion, strategic growth initiatives, and a solid outlook, while also acknowledging competitive pressures and seasonal challenges.