Bridgewater Bancshares Q4 2025 Earnings Report

Bridgewater Bancshares EPS Results

• Actual EPS: $0.44
• Consensus EPS: $0.42
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: N/A

Bridgewater Bancshares Revenue Results

• Actual Revenue: $38.84 million
• Expected Revenue: $36.10 million
• Beat/Miss: Beat by +$2.74 million
• YoY Revenue Growth: N/A

Bridgewater Bancshares Announcement Details

• Quarter: Q4 2025
• Date: 1/27/2026
• Time: After Market Closes
• Conference Call Date: Wednesday, January 28, 2026
• Conference Call Time: 9:00AM ET

Bridgewater Bancshares (NASDAQ:BWB) is the bank holding company for Bridgewater Bank, a commercial bank headquartered in St. Louis Park, Minnesota. The company primarily serves businesses, professionals, entrepreneurs and individuals in the Minneapolis–St. Paul metropolitan area and surrounding Minnesota communities.

Bridgewater Bank provides commercial banking products and services, including commercial real estate and commercial and industrial loans, residential real estate lending, construction financing, business and personal deposit accounts, treasury management and cash-management services. Its digital banking offerings include online and mobile banking, electronic payments and other tools designed to help business and retail customers manage their finances.

Bridgewater Bank was founded in 2005, and Bridgewater Bancshares became a publicly traded company on the Nasdaq under the symbol BWB in 2018. The organization’s business model emphasizes relationship-based banking and customized financing solutions for commercial borrowers, along with deposit and banking services for consumers and businesses.

Bridgewater Bancshares Q4 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Net interest margin expanded to 2.75% in Q4 (up 12 bps) and management now expects to reach a 3.0% NIM by the end of 2026, accelerating prior guidance and supporting net interest income growth.
• Positive Sentiment: Core deposits grew roughly 9% annualized in Q4 (about 8% for 2025) enabling loan growth of ~11% for the year; management expects high-single-digit loan growth in 2026 and is scaling its affordable housing vertical (up 29% in 2025, ~15% of loans).
• Negative Sentiment: Asset quality showed a modest deterioration as non-performing assets rose to 0.41% of assets and Q4 included $1.2M of net charge-offs (a fully reserved C&I loan), which reduced the allowance to 1.31%.
• Positive Sentiment: Expenses were well controlled with an adjusted efficiency ratio of 50.7%; the bank exceeded its 2025 merger cost‑savings target and expects expense growth to align with asset growth in 2026.
• Neutral Sentiment: Capital remains comfortable with CET1 at 9.17%; the bank did not repurchase shares this quarter, retains $13.1M under its repurchase authorization, and expects capital levels to hold relatively stable near term.

Presentation

[Operator]

Good morning, and welcome to the Bridgewater Bancshares 2025 fourth quarter earnings call. My name is Betsy, and I will be your conference operator today. All participants have been placed in a listen-only mode. After Bridgewater's opening remarks, there will be a question-and-answer session. To ask a question, please press Star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press Star then two. 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, VP of Investor Relations at Bridgewater Bank]

Thank you, Betsy, and good morning, everyone. Joining me on today's call are Jerry Baack, 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 2025 fourth 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 2025 fourth quarter earnings release for more information about risks and uncertainties which may affect us.

[Justin Horstman, VP of Investor Relations at Bridgewater Bank]

The information we will provide today is as of and for the quarter ended December 31, 2025, 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 2025 fourth 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 Baack.

[Jerry Baack, Chairman and CEO at Bridgewater Bank]

Thank you, Justin, and thank you, everyone, for joining us this morning. We finished the year strong with robust loan and core deposit growth, net interest margin expansion, and higher fee income. Expenses were also well controlled and asset quality remained strong. A successful quarter reflective of the team at Bridgewater Bank. This all comes as we continue to take market share by providing an unconventional, reliable experience to our clients. We continue to see opportunities in the Twin Cities for both client and talent acquisition and are taking advantage of both. We also see opportunities to grow the business outside of our market by using the expertise we have developed and expanded across the affordable housing market. Not only did we have a great quarter, but we see plenty of reasons for that to continue in 2026.

[Jerry Baack, Chairman and CEO at Bridgewater Bank]

Revenue growth was a key highlight of the quarter, both from a spread and fee perspective. We saw net interest margin expand 12 basis points to 2.75%, driving strong growth in net interest income. Last quarter, we mentioned that we expected to get back to a 3% margin by early 2027. We are well on track for that and in fact, think we can pull it forward into 2026. Joe will talk more about that in a few minutes. Swap fees, while up and down from quarter to quarter, were strong in the fourth quarter, driving an increase in net interest income as well. Core deposit growth of 9% was another highlight of the quarter, which allowed us to produce loan growth of 9% as well.

[Jerry Baack, Chairman and CEO at Bridgewater Bank]

As we've been focused on growing loans in line with core deposits, on a full year basis, core deposits were up 8%, while loans grew at 11% pace, exceeding our mid- to high-single-digit guide we had at the beginning of the year. We also continue to feel good about the strength of our asset quality profile, even as we saw a modest uptick in non-performing assets and net charge-offs in the fourth quarter. Katie will provide more thoughts on this shortly. We pride ourselves on being able to produce consistent tangible book value per share growth for our shareholders. This is evident on slide four and was again the case in the fourth quarter as tangible book value grew 16.5% annualized and was up 15.3% year-over-year.

[Jerry Baack, Chairman and CEO at Bridgewater Bank]

This continues to be a unique part of the Bridgewater story and one we are incredibly proud of. Before I turn it over to Joe, I want to take a minute to share some additional updates. First, in late December, we closed one of the 2 branches we added through the First Minnetonka City Bank acquisition. The decision was due to having other branches in close proximity. Overall, we were pleased to see very little deposit attrition from the FMCB post-merger. We're also on track to open a new branch in Lake Elmo next month. We're excited about the opportunity that will present as we expand further into the growing affluent East Metro of the Twin Cities. Second, we continue to see opportunities related to recent M&A disruption in the Twin Cities, both on the talent and client front.

[Jerry Baack, Chairman and CEO at Bridgewater Bank]

Old National's acquisition of Bremer has been the main one, but the pending acquisitions of MidWestOne and American National have created additional opportunities. Bridgewater is now the second-largest locally led bank in the Twin Cities, so we feel well positioned to be the bank of choice for those looking to work or bank local. Third, I'd like to acknowledge the events that have unfolded in the Twin Cities in recent weeks. It's been difficult to watch what's happening across our community. The people and the city are resilient, and we will get through this. In the meantime, we are actively monitoring the impact these events are having on our team members and clients, and we'll continue to be here to support them in any way we can. Lastly, I want to thank our team for a great year in 2025.

[Jerry Baack, Chairman and CEO at Bridgewater Bank]

With an acquisition, a core conversion, the launch of a new online banking platform, and other technology advancements, there are many new initiatives and challenges to work through. I remain impressed with the team and their consistent willingness to over-deliver. The efforts of our entire team continue to be the magic that makes Bridgewater a place people want to work and do business. I'm thankful for their efforts and the overall leadership across the organization. With that, I will turn it over to Joe.

[Joseph Chybowski, President and CFO at Bridgewater Bank]

Thank you, Jerry. Slide 5 provides more color on the encouraging trends we are seeing with net interest income and net interest margin. We expected net interest margin expansion to return in the fourth quarter, given three Fed rate cuts in late 2025. This is exactly what happened as the margin increased 12 basis points to 2.75%, primarily due to lower deposit costs. With margin expansion and continued earning asset growth, we saw net interest income increase 5% during the quarter. Last quarter, we mentioned that we saw a path to get back to a 3% net interest margin by early 2027.

[Joseph Chybowski, President and CFO at Bridgewater Bank]

Given the expansion we saw in the fourth quarter, and as we look ahead to repricing opportunities in 2026, we are actually pulling forward and believe we can get to 3% NIM by the end of 2026, and this does not assume any additional rate cuts. As a result, we are very optimistic about our ability to continue driving net interest income growth going forward. Slide 6 highlights the declining deposit costs I mentioned, which decreased 22 basis points to 2.97% in the fourth quarter. At year-end, we had $1.8 billion of funding tied to short-term rates, including $1.4 billion of immediately adjustable deposits.

[Joseph Chybowski, President and CFO at Bridgewater Bank]

As a result, given the Fed rate cuts in September, October, and December of 2025, we were able to reprice a good portion of the book lower, driving lower deposit costs and boosting net interest margin. We could see deposit costs move a bit lower in the first quarter as we recognize the full quarter impact of the December rate cut. But absent any additional rate cuts, we would expect deposit costs to begin to stabilize again. On the loan side, we're very pleased to see yields hold steady in the fourth quarter, despite the 3 recent rate cuts.

[Joseph Chybowski, President and CFO at Bridgewater Bank]

This was a function of the loan repricing opportunities we have, which includes $637 million of fixed-rate loans scheduled to mature over the next 12 months at a weighted average yield of 5.55, and another $106 million of adjustable-rate loans, repricing or maturing at 3.84%. With these lower-yielding loans running off the books and new originations in the fourth quarter, going on the books in the low to mid-6s, we have further repricing upside ahead of us. We've also been active in increasing the variable rate mix of our portfolio to create better balance across interest rate environments. Variable rate loans now make up 22% of our loan book, compared to 14% a year ago. Turning to slide 7, we continue to see strong revenue and profitability growth trends.

[Joseph Chybowski, President and CFO at Bridgewater Bank]

In fact, Adjusted ROA was just under 1% in the fourth quarter, while total revenue increased 32% year-over-year. Non-interest income also bounced back in the fourth quarter, driven by increases in swap fees and letter of credit fees. After seeing no swap fee income in the third quarter, we generated $651,000 of swap fee income in the fourth quarter. Quarterly swaps have averaged nearly $500,000 per quarter over the past five quarters, but continue to be quite lumpy due to the timing and size of the fees. We expect swap fees to continue to be a portion of the revenue story in 2026, but given the shape of the yield curve and the current environment, we would expect them to slow a bit. Turning to slide 8, expenses were well controlled during the fourth quarter.

[Joseph Chybowski, President and CFO at Bridgewater Bank]

Throughout much of 2025, we saw higher than usual levels of expense growth as we worked toward the systems conversion of First Minnetonka City Bank in the third quarter. Historically, we have seen expense growth align with asset growth over time. With the conversion behind us, we expected to get back to the pace as fourth quarter expenses, excluding merger-related, were up just 9.5% annualized, which is more in line with our expected pace of asset growth. With well-controlled expenses and strong revenue growth, our adjusted efficiency ratio declined to 50.7%, the lowest level since the first quarter of 2023. It is also worth mentioning that we exceeded our 30% cost savings estimate for 2025 related to our recent acquisition. With that, I'll turn it over to Nick.

[Nick Place, Chief Banking Officer at Bridgewater Bank]

Thanks, Joe. Slide 9 highlights the momentum we continue to have on the core deposit front, thanks to the efforts of our bankers and the opportunities we have in the market. Overall, we saw annualized core deposit growth of 8.8% in the fourth quarter and 7.9% for the full year of 2025. The other notable story here is the improved mix, as we saw strong non-interest-bearing deposit growth for the second consecutive quarter, including an increase of $100 million during the fourth quarter, while brokered deposits have been declining. Looking ahead, we continue to have a strong core deposit pipeline, including deposits we gather as part of our affordable housing initiative.

[Nick Place, Chief Banking Officer at Bridgewater Bank]

... however, we would expect growth to be less linear in 2026, given the nature of the deposit base, especially during the first half of the year. To that extent, we will continue to leverage brokerage, brokered deposits if needed, as we have done in the past. But overall, we feel really good about our ability to continue growth or growing core deposits over time. While core deposit growth has been strong, so has our loan growth, as you can see on slide 10. Loan balances were up 8.9% annualized in the fourth quarter and 11.4% for the year, as our pipeline remains robust and we see continued demand across the market. As we look ahead to 2026, I'm excited about the opportunities that our pipeline and the overall market demand will continue to present.

[Nick Place, Chief Banking Officer at Bridgewater Bank]

On the other hand, the pace of core deposit growth and loan payoff levels will impact the overall level of loan growth. Considering all this, we believe we can maintain loan growth in the high single digits in 2026. Turning to slide 11, you can see that the loan growth we saw in the fourth quarter was driven by an increase in originations, in spite of an increase in payoffs and paydowns as well. The increase in originations was expected, given the strength of our pipeline and some of the deal closings we saw slide from the third quarter into the fourth quarter. The increase in payoffs is due in part to a catch-up from the slower payoff trends we have seen recently, as well as the pullback in rates, allowing for more refinances and sales.

[Nick Place, Chief Banking Officer at Bridgewater Bank]

Turning to slide 12, construction was the largest driver of growth during the fourth quarter, as an increase in new construction projects over the past year or so have begun funding. A good portion of this construction growth came in the affordable housing vertical. We continue to see great traction in the affordable housing space, as balances overall increased $41 million in the fourth quarter, or 27% annualized. On a full year basis, affordable housing balances increased 29% in 2025, spread across the construction, C&I, and multifamily portfolios. We expect this to be a key contributor to loan growth for us going forward as we continue to invest in this vertical. With that, I'll turn it over to Katie.

[Katie Morrell, Chief Credit Officer at Bridgewater Bank]

Thanks, Nick. Slide 13 provides a closer look at the multifamily portfolio, which continues to perform well and reflects a long track record of strong credit quality. Since the bank was founded in 2005, we still have recorded only $62,000 in net charge-offs within this portfolio, underscoring the resilience of the asset class and consistency in our underwriting discipline. In addition, multifamily fundamentals in the Twin Cities remain positive, especially as vacancy rates declined throughout 2025 and concessions became less prevalent, leading to increased rent growth. Multifamily sales volume also increased in the back half of 2025, further supporting the positive market trends in this segment. While there are still a few submarkets where conditions have softened, we remain confident about the multifamily portfolio overall and believe it is positioned to continue performing well.

[Katie Morrell, Chief Credit Officer at Bridgewater Bank]

On the office side, our exposure remains limited at just under 5% of total loans, with the majority located in suburban Twin Cities locations, where performance has been comparatively stronger than central business districts. Turning to slide 14, our overall credit profile remains strong. Non-performing assets increased modestly to 0.41% of assets, driven by a multifamily loan that migrated to non-accrual after the client's original purchase agreement fell through. The property is now under a new contract, giving us confidence in a near-term resolution. We also recorded $1.2 million of net charge-offs during the quarter related to a fully reserved C&I loan. Despite this, full year net charge-offs remained very low, at just 0.04% of average loans.

[Katie Morrell, Chief Credit Officer at Bridgewater Bank]

Our allowance ratio declined slightly from 1.34% to 1.31% due to the charge-off and continues to compare favorably to peers. Importantly, the items driving the modest uptick in NPAs and net charge-offs were both isolated issues and followed an extended period of virtually no non-performing assets or net charge-offs, an outcome that is just not sustainable for a portfolio of our size. Turning to slide 15, our classified loan levels remain low at 1.3% of total loans and 8.3% of capital. Watch and special mention loans are also manageable and make up just over 1% of the loan book. While we continue to actively monitor all loans on our watch list, we did not see any meaningful new migration during the quarter, and as stated previously, we feel credit trends within the portfolio remain stable.

[Katie Morrell, Chief Credit Officer at Bridgewater Bank]

I'll now turn it back over to Joe.

[Joseph Chybowski, President and CFO at Bridgewater Bank]

Thanks, Katie. Slide 16 highlights our comfortable capital position. This includes our CET1 ratio, which increased slightly from 9.08% to 9.17%. We've been able to regularly build capital through our retained earnings since our acquisition in late 2024. We did not repurchase any shares during the quarter, given our strong organic growth pipeline and where the stock was trading. As of year-end, we still had $13.1 million remaining under current share repurchase authorization. In the near term, we expect capital levels to hold relatively stable, given earnings retention and our stronger growth outlook. Turning to slide 17, I'll recap our expectations for 2026. As Nick mentioned, we feel comfortable that we can grow loans in the high single digits in 2026.

[Joseph Chybowski, President and CFO at Bridgewater Bank]

This will be dependent on a variety of factors, especially our ability to continue generating strong core deposit growth as we look to keep our loan-to-deposit ratio in the 95%-105% range. From a net interest margin standpoint, we are more bullish now than we were this time a year ago. We think we can now get to a 3% net interest margin by the end of 2026 instead of early 2027, and this does not assume any additional rate cuts. We also expect to get back to growing expenses in line with assets, unlike 2025, where expense growth was a bit higher as we worked toward the acquisition systems conversion. We feel we're well reserved at current levels and would expect provision to remain dependent on the pace of loan growth and the overall asset quality of the portfolio.

[Joseph Chybowski, President and CFO at Bridgewater Bank]

I'll now turn it over to Jerry.

[Jerry Baack, Chairman and CEO at Bridgewater Bank]

Thanks, Joe. We are really pleased how we finished 2025 and the catalysts we have to support growth and profitability heading into 2026. On slide 18, I'll finish up by outlining our strategic priorities we will be focusing on in 2026. These are very consistent with the priorities we set in 2025, but there are some new areas where we will increase our focus. The first is optimizing our levels of profitable growth. In 2025, we were able to get back to the levels of growth we had been accustomed to. We want to ensure that we maintain that with a focus on optimizing profitability. Continuing to align loan growth with core deposit growth while expanding our net interest margin will be key. Second, we want to continue to gain market share in the Twin Cities.

[Jerry Baack, Chairman and CEO at Bridgewater Bank]

This has always been an objective, and we are proud of the progress we have made. Given the M&A disruption, we believe we are the bank of choice for clients who appreciate our local knowledge and commitment. We will look to expand our expertise and capacity across certain targeted verticals, including nonprofits and SBA, areas where we have added some impressive talent. In addition, we implemented an M&A readiness plan in 2025 that positions us well to take advantage of future opportunities. Third is to continue expanding the reach of our affordable housing vertical, both locally and nationally. This includes enhancing our perm product offering, which would help drive additional loan and swap fee income. Last is continuing to leverage technology investments to support growth and organizational efficiencies across the business. This includes leveraging recent investments and developing a more formal strategy around AI.

[Jerry Baack, Chairman and CEO at Bridgewater Bank]

With that, we will open it up for questions.

[Operator]

As a reminder, to ask a question, please press Star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press Star, then two. At this time, we will pause momentarily to assemble our roster. The first question comes from the line of Nathan Race with Piper Sandler. Please go ahead.

[Nathan Race, Analyst at Piper Sandler]

Hey, guys. Good morning. Thanks for taking the questions.

[Nick Place, Chief Banking Officer at Bridgewater Bank]

Good morning, Nate.

[Nathan Race, Analyst at Piper Sandler]

Maybe Joe or Nick, I was wondering if you could just kind of unpack some of the deposit growth in the quarter. Obviously, non-interest-bearing had some nice increase quarter-over-quarter. You know, curious if there's any seasonality in that or and just how you're kind of seeing, you know, the deposit gathering pipeline unfold with some of the hires you've made recently. Just to Jerry's point on some of the M&A-related disruption ongoing in the Twin Cities.

[Nick Place, Chief Banking Officer at Bridgewater Bank]

Yeah. Hey, Nate. Good morning, it's Nick. Yeah, I mean, we felt really good about our overall deposit growth, not only for the quarter but the year. Q4 does tend to be a seasonally high watermark for us. We do have a lot of clients that tend to build balances late in the year, and some of those balances do trickle out in Q1. So there was some seasonality there. We feel really good about our deposit pipeline overall. However, we're continue to get in front of great client relationships, you know, both locally and nationally through that affordable housing vertical. And the talent we've been able to pick up on both of those fronts has been great.

[Nick Place, Chief Banking Officer at Bridgewater Bank]

So, you know, we do expect, as we've seen over the last handful of years, that Q1 and Q2 of the year do tend to be, you know, more modest, and we've seen even outflows in those quarters in the past. So, that does tend to be the low water mark for us on the year. But, you know, we feel great about the progress that we're making on growing core deposits. And should we need to, as we've said before, I mean, we will supplement with brokered deposits if loan growth is robust in a quarter and some of that seasonality is impacting the pace of core deposits. So overall, we feel really good about where we're at.

[Nathan Race, Analyst at Piper Sandler]

That's helpful. Thanks, Nick. Maybe for Joe, with the $743 million of loans that you have fixed and adjustable rate repricing higher over the balance of this year, could you kind of just speak to, you know, the cadence of that? Is there any kind of lumpiness quarter to quarter, or is it pretty spread out? Just in terms of thinking about that as kind of the main driver to get close to a 3% margin by the end of this year.

[Joseph Chybowski, President and CFO at Bridgewater Bank]

Yeah, Nate. No, it's as you said, it's pretty well laid out. I mean, it's not like there's super concentration one quarter versus the other. So we feel good about just kind of continued repricing higher. You know, that'll be the biggest driver of the NIM, you know, guide to 3% is really on the asset side. And I think just given that roll-off and given where we're originating loans today, we feel that's very achievable.

[Nathan Race, Analyst at Piper Sandler]

Okay. Maybe one last one for me on expenses. You know, I appreciate, you know, the commentary or outlook there is pretty consistent with asset growth. So is it fair to expect, you know, 2026 expenses, you know, in that high single digit range, or is it maybe kind of more of a low double-digit expectation for this year?

[Joseph Chybowski, President and CFO at Bridgewater Bank]

No, I think high singles, like you said. I mean, asset growth, you know, we expect grows in the high singles, and so, you know, as we continue to invest in the business, people and technology, we will manage that the same. And like we said, you know, 25, obviously, given the acquisition, was a little outside of the norm, but I think if you go back further, look, I mean, we've historically always operated that way, so we feel good about it.

[Nathan Race, Analyst at Piper Sandler]

... Okay, great. And sorry, just within that context, I mean, does that contemplate any additional production-related hires? Obviously, you know, there's been a theme on this call in terms of some of the M&A-related disruption. So just curious, you know, what type of conversations you're having and kind of what the magnitude of additional opportunities to maybe add production talent, or do you think, you know, the existing team has plenty of capacity just to grow with some of the disruption ongoing?

[Nick Place, Chief Banking Officer at Bridgewater Bank]

Yeah, Nate, this is Nick. Yeah, we can continue to get some operational leverage out of the team. I think we're evaluating, you know, not only the capacity of the group, how portfolios are allocated, but really our internal processes to streamline things. So we're certainly looking in the business as well to gain some leverage there. While we will be opportunistic on the hiring front, we've been able to pick up some people here recently, and we will always be opportunistic on the hiring side. So as it relates to expenses, I think, you know, that can be difficult to predict. But you know, overall, we really are excited about our prospects to drive that growth, both with the staff we have and the talent that we're bringing in.

[Nathan Race, Analyst at Piper Sandler]

Okay, great. I apologize. Actually, just one more, Nick. To your point, are there any non-solicits in place with some of the hires that you've made on the production side of things lately?

[Nick Place, Chief Banking Officer at Bridgewater Bank]

You know, it varies from person to person, but surprisingly, most of them have not had non-solicits.

[Nathan Race, Analyst at Piper Sandler]

Okay, great. I really appreciate all the color. Thanks, guys, and congrats on a great quarter and year.

[Nick Place, Chief Banking Officer at Bridgewater Bank]

Thanks, Nate.

[Operator]

The next question comes from Brendan Nosal with Hovde. Please go ahead.

[Brendan Nosal, Director at Hovde]

Hey, good morning, everybody. Hope you're doing well. Joe, maybe starting off for you with the margin outlook. Totally get it, it's a more bullish outlook. You're pulling forward the 3% margin. Can you just help us with kind of the apples to apples, given you pulled out the rate cuts? Like, if you do still get the 50 basis points of cuts across 2026, like, how does the margin compare to the current 3% expectation by year-end?

[Joseph Chybowski, President and CFO at Bridgewater Bank]

Yeah, Brendan, I mean, it pulls it forward. I think, you know, this last quarter is a prime example where you get three cuts. You know, we really fourth quarter, with the late cut in third quarter in September, you really started to realize that in fourth quarter. You get one right in the middle in October, and then you obviously get the one in December that, you know, we expect to kind of reap the benefits here in the first quarter. So I think the deposit cut story, I mean, if you, if you do get two rate cuts, it just pulls forward that 3% kind of target. I think the asset side, you know, is much more obviously reliant on sloping the curve and the repricing story.

[Joseph Chybowski, President and CFO at Bridgewater Bank]

So I just think the deposit story, you know, if we don't get those cuts, we expect, you know, cost to somewhat stabilize kind of middle part of the year. But I think, yeah, if you do get kind of an implied rate scenario, and two cuts this year, that just pulls that forward and directly impacts deposit costs.

[Brendan Nosal, Director at Hovde]

Okay, perfect. That's helpful. Thanks, Joe. Maybe turning to asset quality. Can you folks just update us on that CBD office loan that flipped to non-accrual earlier in the year? Like, you know, where are you on kind of workout and what are expectations around that credit?

[Katie Morrell, Chief Credit Officer at Bridgewater Bank]

Brendan, this is Katie. You know, we've mentioned previously, we expect that to be a longer-term workout. We've given the borrower time to, you know, re-lease the vacant space there. So, that we still have a specific reserve on the loan and expect it to be a longer-term workout.

[Brendan Nosal, Director at Hovde]

Okay. All right, thanks for the update. One last one from me. Jerry, you know, a lot of good organic trends at the bank, in 2026, but would love to hear your take on the M&A environment, and your own appetite for, you know, potential tuck-in acquisition as you look over the, the year ahead. Thanks.

[Jerry Baack, Chairman and CEO at Bridgewater Bank]

Hey, Brendan. Really just more of the same of what we've talked about in the past, and we're always talking to local owners of banks and, you know, continue to have those conversations and hope, you know, would have something similar to what the First Minnetonka City Bank did for us. So, so I mean, again, we always say, and we mean it, if we wake up every day and we look at the business organically and what we can do organically and take market share, and the M&A strategy is really second place to that. But, we continue to be optimistic that, you know, over the next few years, a couple more deals might come our way.

[Brendan Nosal, Director at Hovde]

Okay, fantastic. Well, thanks again for the questions.

[Operator]

The next question comes from Jeff Rulis with the D.A. Davidson. Please go ahead.

[Jeff Rulis, Analyst at D.A. Davidson]

Thanks. Good morning. Wanted to check in on the affordable housing vertical. Just kind of wanted, in your discussions, how big could you, or, or do you intend to grow that? Is there a cap on the size of that? I think around... I think you mentioned 650 now, but just wanted to see what the, if there's a concentration size that you'd like to keep it to.

[Nick Place, Chief Banking Officer at Bridgewater Bank]

Hey, Jeff, this is Nick. Yeah, I mean, we really like the space. You know, we do like the diversity in the geographic locations of some of the clients and projects that we're financing. We appreciate the diversification in the product type. Some of it lands in our construction bucket, some is in sort of stabilized multifamily... there's some land transactions in there, there's C&I. So we appreciate what that can provide for us, too. You know, it's roughly 15% or so of the book today. Overall, we feel really good about where that's at and continuing to grow that over time. We believe in the short term, the pace of that portfolio growth will outpace the overall portfolio growth.

[Nick Place, Chief Banking Officer at Bridgewater Bank]

So we expect that to, you know, increase as a percentage of the book overall here near term. We haven't set any specific, you know, parameters around how big we want that to get, but, you know, we're being methodical about how we're growing it and overall, feel really good about the space.

[Jeff Rulis, Analyst at D.A. Davidson]

That's great. And then I can't remember, Nick, if it was you or Joe on the swap fees. We know these are going to be lumpy, but trying to model that, I think there was some mention of maybe that maybe cools off a bit, but for a full year, is that somewhat concurrent with growing the affordable housing vertical, in terms of, you know, swap fees going forward?

[Nick Place, Chief Banking Officer at Bridgewater Bank]

Yeah, I mean, there's certainly opportunity within the affordable housing vertical to drive some additional swap fee revenue over time, and we're actively, you know, building out a plan for that and a pipeline for those. You know, that said, the swap market was a bit sort of dislocated with Treasuries for a while there last year. That did provide a bit of a boost in attractiveness of that product, and you know, to some degree, drove additional swap transactions in 2025. So that market's more in line with sort of its historical average today compared to Treasuries, and so that does make those transactions a little less competitive.

[Nick Place, Chief Banking Officer at Bridgewater Bank]

But, you know, we're really pleased with the progress that we've made just on educating the banker teams on how to sell through that product and educating our clients on the benefits of you know, leveraging interest rate swaps on some of their transactions. So, you know, we expect it to be a bigger piece of the business overall, but you know, the last four or five quarters, we probably averaged you know, $500,000 a year, even though it's been lumpy. I would expect it to be a bit inside of that here this year, just given some of that swap spread to Treasuries kind of being more in line with historical average.

[Jeff Rulis, Analyst at D.A. Davidson]

Thanks, Nick. And then one other one for Katie on the credit side. Just checking what you said on both the non-accrual was really one multifamily loan, and the increase in net charge-off was a C&I loan?

[Katie Morrell, Chief Credit Officer at Bridgewater Bank]

Yeah, that's correct. Both of those upticks were, you know, directly tied to sort of isolated loans. So, you know, we feel good about the portfolio overall, and it's really just, you know, more of a timing issue.

[Jeff Rulis, Analyst at D.A. Davidson]

Got it. So it doesn't sound that systemic in multifamily. I guess, are you seeing any... Where you see pressure, is it rate reset? Kind of one-offs, or where are the pinch points on multifamily, when you do see some issues crop up?

[Katie Morrell, Chief Credit Officer at Bridgewater Bank]

Yeah, I think, you know, overall, we feel really good about our multifamily portfolio. You know, as I mentioned in the prepared remarks, there's certainly still some pockets that are more challenged. So I would say that's, you know, what drives some of the challenges still. But, overall, I mean, the market fundamentals are improving. Property performances individually are improving. So, the trends are all positive.

[Jeff Rulis, Analyst at D.A. Davidson]

Katie, when you say pockets of challenge, is that the geographic location, the type of building?

[Katie Morrell, Chief Credit Officer at Bridgewater Bank]

Yes.

[Katie Morrell, Chief Credit Officer at Bridgewater Bank]

Yeah, geographic pockets.

[Jeff Rulis, Analyst at D.A. Davidson]

Okay.

[Katie Morrell, Chief Credit Officer at Bridgewater Bank]

Yep, yep. That's correct. Mm-hmm.

[Jeff Rulis, Analyst at D.A. Davidson]

Great, appreciate it. Thank you.

[Operator]

As a reminder, if you would like to ask a question, please press Star, then one to join the question queue. The next question comes from Brandon Rud with Stephens. Please go ahead.

[Brandon Rud, Analyst at Stephens]

Morning.

[Nick Place, Chief Banking Officer at Bridgewater Bank]

Morning.

[Brandon Rud, Analyst at Stephens]

Most of my questions have been asked. I guess I'll maybe start with the question on slide 18, the modernizing the core banking system. I guess, can you just maybe provide a general timeline for that, I-what I'll call a quality of life improvement from the client-facing side or something that can be an expense saver over the longer term?

[Joseph Chybowski, President and CFO at Bridgewater Bank]

Hey, Brandon, this is Joe. I think, I mean, to all your questions, it's, it's really all the above. You know, we're a Fiserv bank, so you know, historically, we've... and still today, we, you know, our core runs through, through Fiserv, and I think some of the technology innovation, you know, 5, 7 years ago, was reliant on, on really Fiserv, and their innovation stack. So the last couple of years, we've really spent a lot of time evaluating, you know, how can we position ourselves to, you know, take a better advantage of kind of emerging technologies and set ourselves up to, somewhat decouple from, you know, Fiserv's innovation. And, so I think that modernizing core banking is really a lot of that.

[Joseph Chybowski, President and CFO at Bridgewater Bank]

I mean, it's, it's everything from efficiencies internally and how we, you know, book loans and deposits. But ultimately, how do we best serve our clients? So how do we stay in front of emerging technologies, trends? You know, it's, it's moving so quickly, and so at the end of the day, the core banking stack is more of a custodian of information, and I think we really want to be set up such that, you know, we can, we can flex and, we can innovate, you know, with the space. So to your point, it's, it's a longer term, a longer term initiative, certainly, and it's, it's not one that's, you know, just begun today.

[Joseph Chybowski, President and CFO at Bridgewater Bank]

We've been working on it for years now, and so we're just excited for the position that we're in and really the optionality that we have.

[Brandon Rud, Analyst at Stephens]

Got it. Okay. I appreciate that. Maybe just a last one here on the increased competition in Twin Cities. Are you seeing that have any impact on loan spreads or new deposit rates? We've heard from a few other banks that there are some irrational competitors out there, and I'm just curious if that increased competition is impacting that at all.

[Nick Place, Chief Banking Officer at Bridgewater Bank]

Hey, Brandon, this is Nick. Yeah, we definitely saw increased competition, you know, particularly on the loan front throughout 2025. I think, you know, a lot of banks had built up some liquidity as they sort of retrenched after 2023 and have better line of sight on where sort of rates are stabilizing out at. And so a lot of banks kind of got off the sidelines and were back in the market. You know, I see that as a good thing overall. I think having a healthy banking economy is good for our local economy and ultimately will just benefit all of us. So, you know, in our pipeline, you know, albeit probably peaked out in third quarter of last year, still remains really strong.

[Nick Place, Chief Banking Officer at Bridgewater Bank]

I mean, we're probably 75%-80% of where we were at the peak. So we feel really good about, you know, our prospects to continue to grow, in spite of some of the increased competition. And we'll let some of those, you know, transactions, if people want to go out and buy, they can go ahead and do that, and we'll keep. We'll move on to the next opportunity.

[Brandon Rud, Analyst at Stephens]

Okay, perfect. Thank you for taking my questions.

[Nick Place, Chief Banking Officer at Bridgewater Bank]

Thanks.

[Operator]

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

[Jerry Baack, Chairman and CEO at Bridgewater Bank]

I just want to say thank you, everyone, for joining the call today. We're very excited about 2026 and the, the future here at BWB. Part of that is the strategic leadership team that we have now and, my confidence in, in them moving forward. I just want to thank our incredible team members here at Bridgewater Bank. Have a great day. Thanks.

[Operator]

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

Participants

Executives

• Jerry Baack, Chairman and CEO
• Joseph Chybowski, President and CFO

Analysts

• Brandon Rud, Analyst at Stephens
• Brendan Nosal, Director at Hovde
• Jeff Rulis, Analyst at D.A. Davidson
• Justin Horstman, VP of Investor Relations at Bridgewater Bank
• Katie Morrell, Chief Credit Officer at Bridgewater Bank
• Nathan Race, Analyst at Piper Sandler
• Nick Place, Chief Banking Officer at Bridgewater Bank