Summary of Bridgewater Bancshares Q2 2026 Earnings Call

1Key Financial Results and Metrics

Return on Average Assets (ROA): Surpassed 1% for the first time since early 2023, reflecting improved profitability.

Net Interest Margin: Increased to 3.07%, exceeding the 3% target set for 2026.

Net Interest Income: Grew at an annualized rate of 21% in Q2.

Tangible Book Value: Increased 17% annualized to $16.61, with over 50% growth in the last four and a half years.

Common Stock Repurchases: Approximately $700,000 repurchased at an average price of $18.12 per share.

CET1 Ratio: Increased to 9.61%, up 58 basis points year-over-year.

2Strategic Updates and Business Highlights

Talent Acquisition: Added 15 key hires from competitor banks, enhancing the bank's ability to scale and serve clients.

Loan Growth: Achieved an annualized growth rate of 5.4%, focusing on profitable growth despite low core deposits.

Asset Quality: Minimal net charge-offs and stabilization in non-performing assets, with a slight increase to 40 basis points.

Affordable Housing Loans: Year-over-year growth of 22% in this vertical, which now comprises 16% of the loan portfolio.

3Forward Guidance and Outlook

Loan Growth Expectation: Targeting mid to high single-digit growth for the remainder of 2026, contingent on core deposit growth and competition.

Net Interest Margin: Anticipating continued expansion but at a slower pace than in Q2.

Expense Management: Expecting expenses to remain stable in the second half of 2026 after a front-loaded increase due to new hires.

4Challenges and Points of Concern

Core Deposits: Experienced a seasonal decline of 3.5% in core deposits, with reliance on wholesale funding to supplement.

Loan Payoffs: Elevated payoff activity is expected to continue, impacting loan growth.

Competitive Pressures: Increased competition for both deposits and loans, with aggressive pricing from larger institutions and credit unions.

5Notable Q&A Insights

Loan Payoffs: Management characterized recent payoffs as part of the natural lifecycle of client transactions rather than rate-driven, with consistent levels expected moving forward.

Margin Expansion: Future margin growth will likely depend more on earning asset repricing rather than deposit cost reductions.

Expense-to-Asset Ratio: While this ratio has increased, management is optimistic about leveraging new hires to improve it over time as production ramps up.

Deposit Competition: Competitive pressures remain high, but management sees opportunities for growth, especially in the back half of the year. Overall, Bridgewater Bancshares reported a strong quarter with significant improvements in profitability and strategic positioning, despite facing challenges related to deposit growth and competitive pressures.