Bridgewater Bancshares Q2 2026 Earnings Report

Bridgewater Bancshares EPS Results

• Actual EPS: $0.45
• Consensus EPS: $0.45
• Beat/Miss: Missed by -$0.00
• One Year Ago EPS: N/A

Bridgewater Bancshares Revenue Results

• Actual Revenue: $40.89 million
• Expected Revenue: $41.43 million
• Beat/Miss: Missed by -$543.00 thousand
• YoY Revenue Growth: N/A

Bridgewater Bancshares Announcement Details

• Quarter: Q2 2026
• Date: 7/21/2026
• Time: After Market Closes
• Conference Call Date: Wednesday, July 22, 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 Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Bridgewater posted a strong quarter with return on average assets above 1% for the first time since early 2023, helped by net interest margin expansion and higher net interest income.
• Positive Sentiment: The company said its net interest margin reached 3.07%, already exceeding its full-year target, and management expects additional—but slower—margin expansion in the back half of 2026.
• Neutral Sentiment: Loan growth remained disciplined at a 5.4% annualized pace as management prioritized profitability over volume amid elevated competition and slower core deposit growth. The company said it expects mid- to high-single-digit loan growth for the rest of the year.
• Neutral Sentiment: Asset quality stayed generally solid, with net charge-offs at just 4 basis points, though non-performing assets rose modestly due to a mixed-use property and an office loan being worked toward resolution. Management increased reserves on the office loan and said both problem credits are moving toward near-term disposition.
• Positive Sentiment: Bridgewater continued to build capital and book value, with CET1 rising to 9.61% and tangible book value up 17% annualized to $16.61. The bank also repurchased about $700,000 of stock during the quarter at an average price of $18.12.

Presentation

[Operator]

Good morning, and welcome to the Bridgewater Bancshares 2026 second quarter earnings call. My name is Nick, 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 touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star and 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 Bancshares]

Thank you, Nick, 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 2026 second quarter financial results. We'll 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.

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

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 second quarter earnings release for more information about risks and uncertainties which may affect us. The information we'll provide today is as of and for the quarter ended June 30th, 2026, and we undertake no duty to update the information. We may also disclose non-GAAP financial measures during this call.

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

We believe that 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 second 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 Bancshares]

Thank you, Justin, thank you for joining us this morning. I'm thrilled to say that Bridgewater reported another strong quarter. We continue to take market share, saw improved profitability, and built tangible book value. We surpassed a 1% ROA for the first time since early 2023, which was largely driven by continued net interest margin expansion and net interest income growth. We reported a second quarter margin of 3.07%, which exceeds the 3% goal we set at the end of 2026. Most importantly, net interest income continued to grow, up an impressive 21% annualized in the second quarter. We have been very pleased with the overall revenue growth momentum, which helped improve our efficiency ratio. With a strong reputation for being the employer of choice, we added to our talent base.

[Jerry Baack, Chairman and CEO at Bridgewater Bancshares]

We made several opportunistic hires, adding top talent and taking full advantage of the continued market disruption in the Twin Cities. This resulted in some elevated personnel expenses as talent became available earlier than expected. Year-to-date, we have added 15 key hires from competitor banks that have recently been acquired. These additions, including both production and office talent, will support the future scaling of the bank, strengthen our ability to serve clients, and create long-term value for shareholders. During the second quarter, we remained disciplined to not only grow the balance sheet but ensure we were growing it profitably. We grew loan balances at an annualized pace of 5.4% as core deposits were seasonally low.

[Jerry Baack, Chairman and CEO at Bridgewater Bancshares]

Nick will talk more about how we're thinking about growth in a few minutes. We are continuing to get in front of new and existing clients and are feeling good about the momentum on both sides of the balance sheet. Asset quality was a strength of a quarter once again, as we had minimal net charge-offs. We saw a modest uptick in non-performing assets but have seen stabilization across our watch, special mention, and substandard loans. Katie will provide more thoughts shortly. As a team, we continue to feel good about the overall asset quality of our loan portfolio. We continue to build capital through retained earnings during the second quarter as our CET1 ratio increased 8 basis points to 9.61% and is now 58 basis points year-over-year.

[Jerry Baack, Chairman and CEO at Bridgewater Bancshares]

During the past quarter, we repurchased approximately $700,000 of common stock, taking advantage of a weighted average price of just $18.12 per share. As you know, tangible book value has always been the highlight for Bridgewater, and that was the case again in the second quarter as tangible book value increased 17% annualized to $16.61. On slide four, you will note the tangible book value has grown over 50% in the last 4.5 years. This remains an important differentiator for us.

[Jerry Baack, Chairman and CEO at Bridgewater Bancshares]

Before I turn it over to Joe, I want to take a moment to thank our team members for all their efforts. I believe our unique culture is a real asset in the market. It's been exciting to onboard these individuals and welcome them to the BWB team. We have a group that's motivated to serve our clients and keep strengthening Bridgewater's foothold in the market. I'm confident that we have the right team in place and grateful for all the efforts of our team members, both new and old. With that, I'll turn it over to Joe.

[Joe Chybowski, President and CFO at Bridgewater Bancshares]

Thanks, Jerry. Starting on slide five, we continue to see strong profitability and revenue growth trends as our return on average assets top 1%. This improved profitability has been a function of strong revenue growth as net interest margin expansion and balance sheet growth have driven meaningfully higher net interest income.

[Joe Chybowski, President and CFO at Bridgewater Bancshares]

I'll talk more about this on the next slide. In addition, we've been pleased with the non-interest income contribution to total revenue. Swap fees and investment advisory fees continue to be meaningful sources of fee income that we didn't have a couple of years ago. Letter of credit fees bounced back in the second quarter. Turning to slide six, our ability to drive revenue growth through net interest income continues to be a consistent part of the Bridgewater story. During the second quarter, net interest income grew at a 21% annualized pace, driven by both net interest margin expansion and earning asset growth. We are very pleased with the margin expansion we have seen so far in 2026. You'll remember that we entered 2026 with a 275 margin in the fourth quarter of 2025 and a goal to achieve a 3% margin by the end of the year.

[Joe Chybowski, President and CFO at Bridgewater Bancshares]

After nearly getting there in the first quarter, we saw another 8 basis points of expansion in the second quarter, already putting us over our target at 3.07%. With deposit costs stabilizing, the margin expansion during the quarter was primarily due to the ongoing loan repricing we have seen across our portfolio. In addition, loan fees have continued to increase as payoffs remained elevated. Looking ahead, we do expect to see some additional net interest margin expansion in the back half of 2026, albeit at a slower pace than we saw in the second quarter. For reference, our net interest margin for the month of June 2026 was 3.08%, compared to 3.07% for the full quarter. With continued growth opportunities and margins slowly ticking higher, we're well-positioned for ongoing net interest income growth in the quarters ahead. Slide seven provides more details on the net interest margin drivers.

[Joe Chybowski, President and CFO at Bridgewater Bancshares]

Loan yields expanded 10 basis points during the second quarter and are now up 13 basis points year-to-date, given the repricing of our larger fixed-rate portfolio, which makes up 64% of the loan book. The expansion of our loan yields has been very strong relative to the rest of the banking space. We would expect to see some additional loan repricing to support the future margin, as our loan portfolio includes $629 million of fixed-rate loans scheduled to mature over the next 12 months at a weighted average yield of 5.62%, and another $114 million of adjustable-rate loans repricing or maturing at 3.99%. With these lower yields running off the books and new originations in the second quarter going on the books in the low 6%, we have further repricing upside ahead of us.

[Joe Chybowski, President and CFO at Bridgewater Bancshares]

We have also been taking proactive steps over the past year or two to make our portfolio more rate neutral by originating more variable rate loans and ultimately aligning our variable rate loan book with our variable rate deposit book. Variable rate loans now make up 25% of the loan portfolio, up from 18% a year ago. While lower deposit costs were a significant driver of margin expansion in the first quarter, we saw deposit costs remain relatively stable in the second quarter, given past rate cuts being fully priced in, as well as seasonal deposit mix shifts. Turning to slide eight, we continue to operate a highly efficient business model with an efficiency ratio consistently below peers. Not only do we have a strong revenue growth story, we also have a track record of a well-controlled expense base.

[Joe Chybowski, President and CFO at Bridgewater Bancshares]

In the first half of 2026, we proactively took advantage of unique opportunities in our market to invest in the business and our people. Given the recent M&A disruption in the Twin Cities, there has been an influx of available talent, and we didn't want to miss an opportunity to secure people we felt would be great long-term fits for Bridgewater. Thanks to our culture and our prominence in the local banking space, we have been able to add 15 talented and experienced individuals from recently acquired competitor banks in 2026 alone. Given the additional hiring, we have seen a pull forward of expenses year-to-date. However, we believe this will support the future growth and scaling of the bank as we move through 2026 and beyond.

[Joe Chybowski, President and CFO at Bridgewater Bancshares]

Overall, we generated positive operating leverage in the second quarter as total revenue increased at a 20% annualized pace, while non-interest expense increased at only 13%. Given the higher pace of expense growth in the first half of the year, we expect to be able to hold expenses relatively flat from second quarter levels over the remainder of 2026, with positive operating leverage momentum continuing. With that, I'll turn it over to Nick.

[Nick Place, Chief Banking Officer at Bridgewater Bancshares]

Thanks, Joe. Turning to slide nine. Core deposits continue to be a key priority for us as we have seen strong momentum over the past couple of years. During the second quarter, total deposits increased $41 million, or 3.8% annualized from the first quarter, while core deposits declined 3.5%. As a reminder, the occasional decline in core deposits is not unusual for us as growth is not always linear given the nature of our primarily commercial deposit base. The second quarter is also typically our seasonal low. In addition, we have seen real estate clients having new opportunities and beginning to invest cash into new projects, ultimately resulting in some deposit outflows. In the meantime, we supplemented core deposits with wholesale funding similar to what we have done in the past. Looking ahead, we remain focused on aligning loan growth with core deposit growth over time.

[Nick Place, Chief Banking Officer at Bridgewater Bancshares]

While deposit competition remains elevated in the market, we expect to continue the historical core deposit momentum we have seen, especially given stronger seasonality trends we tend to experience in the back half of the year. Our core deposit pipeline remains strong, including the more deposit-rich affordable housing vertical, as well as additional opportunities we are seeing from the M&A disruption in the Twin Cities. In addition, we have already exceeded our first-year deposit goals for our new branch in Lake Elmo, highlighting the attractiveness of that high-growth community in the Twin Cities.

[Nick Place, Chief Banking Officer at Bridgewater Bancshares]

Turning to slide 10, the pace of loan growth in the second quarter was consistent with what we saw in the first quarter at 5.4% annualized. Given the slower pace of core deposit growth in the first half of the year, we have been more disciplined on the loan side as we focus on generating balanced, profitable growth across the balance sheet. Loan competition remains elevated as credit unions and some of the larger regionals are being more aggressive on pricing.

[Nick Place, Chief Banking Officer at Bridgewater Bancshares]

To us, being disciplined means knowing we don't need to grow at any cost. During the first half of the year, we've been more selective on pricing and structure, emphasized deals with the right clients, and invested in core verticals where profitability is highest. The strategy has paid off. Loan growth has been a bit more moderated than expected, but we have seen substantial margin expansion and ultimately very strong net interest income growth.

[Nick Place, Chief Banking Officer at Bridgewater Bancshares]

Loan growth over the back half of the year will be dependent on levels of core deposit growth, competition, and payoffs. We have always had a strong growth engine. Demand is still high, and we are getting in front of an abundance of deals, including opportunities related to the M&A disruption. Some of the spreads we are seeing today are just too tight for our liking. As we look to optimize overall profitability, we are targeting a mid to high single-digit pace of loan growth over the rest of 2026. Turning to slide 11, you can see the discipline we've had on the loan side as originations have moderated a bit. Payoff activity also remains elevated, similar to what other banks are seeing. This has been due to the natural selling of assets as well as the tightening of agency spreads driving refinance activity.

[Nick Place, Chief Banking Officer at Bridgewater Bancshares]

We would expect payoffs to continue to be a growth headwind for us over the near term. Turning to slide 12, you can see the majority of our loan growth in the second quarter came in multifamily, an area where we have immense experience and expertise. Construction and development saw the largest decrease as some of our commercial construction projects completed and migrated into multifamily or other CRE portfolios. We've continued to add key production folks in verticals we are focused on, including C&I and CRE. There are real opportunities for us to continue taking market share in these areas, and the Minneapolis market continues to be strong. Finishing up on slide 13, I wanted to give an update on what we are seeing in the national affordable housing space, a key growth vertical that it currently makes up about 16% of our loan portfolio.

[Nick Place, Chief Banking Officer at Bridgewater Bancshares]

Overall, we have seen 22% year-over-year growth in affordable housing loans, which as a reminder, are spread across multifamily, C&I, and construction. Balances remained relatively flat in the second quarter due to a larger payoff in the C&I credit. However, the multifamily portion of the portfolio continued to grow, now making up 75% of our affordable housing balances. As I mentioned earlier about focusing on our most profitable verticals, new affordable housing originations tend to have higher yields than the rest of the loan portfolio. This is an added benefit to our overall profitability given that we expect continued growth in this vertical. With that, I'll turn it over to Katie.

[Katie Morrell, Chief Credit Officer at Bridgewater Bancshares]

Thanks, Nick. Turning to slide 14, the overall credit profile of our portfolio continues to be strong. Non-performing assets did move modestly higher in the quarter to 40 basis points. This increase was driven by one mixed-use property that was already rated substandard. We are working with the borrower as they pursue a sale of the property and remain optimistic about achieving a near-term resolution. I also wanted to provide a quick update on the central business district office loan that was moved to non-accrual back in the first quarter of 2025. While this has been a longer-term workout, we are now taking steps toward a near-term disposition of this asset. In connection with that process and given the limited leasing progress over the past year, we've increased the specific reserve for this loan up to a total of $4 million.

[Katie Morrell, Chief Credit Officer at Bridgewater Bancshares]

As we continue to advance the disposition process, additional reserve adjustments may be necessary depending on market feedback and transaction developments. Overall, we are pleased with the progress being made toward resolving our two largest non-performing assets and remain confident in the overall credit quality of the portfolio. We have continued to slowly lower our conservative reserve level down 5 basis points from a year ago to 1.30% of loans. We expect to reduce this down even further as we continue to execute on problem loan action plans and resolve remaining credit issues.

[Katie Morrell, Chief Credit Officer at Bridgewater Bancshares]

For the second quarter, net charge-offs were very low once again at just 4 basis points. Now looking at slide 15, our watch and special mention as well as substandard loans have remained relatively stable, both sitting right around 1% of total loans. These stable levels reflect the conservative underwriting and strong asset quality that continue to characterize the Bridgewater portfolio. I'll now turn it back over to Joe.

[Joe Chybowski, President and CFO at Bridgewater Bancshares]

Thanks, Katie. Slide 16 highlights our growing capital position, which continues to build through retained earnings. Notably, our CET1 ratio increased from 9.53% to 9.61%. We did resume share repurchases early in the quarter, given where the stock was trading. We repurchased about 700,000 of common stock at a weighted average price of $18.12. You'll recall that we also launched an at-the-market offering in the first quarter to give us the optionality to raise additional capital if we needed and if market conditions were favorable. To date, we have not issued any shares into the market as part of the ATM. We have built ourselves optionality regarding capital today, and as we've demonstrated over the years, we will continue to be strong capital stewards as we evaluate capital levels and deployment going forward.

[Joe Chybowski, President and CFO at Bridgewater Bancshares]

Turning to slide 17, I'll recap our near-term expectations. As Nick mentioned, with a focus on profitable growth, we expect a mid to high single-digit pace of loan growth in the back half of the year, given a variety of factors including competition, loan payoffs, and our ability to continue generating strong core deposit growth. From a net interest margin standpoint, we have already surpassed our 3% target that we had for the end of the year. However, we still feel there is more room to go, but we would expect the pace of margin expansion to continue slowing in the third quarter. More importantly, with our continued loan growth, we can continue to drive increased net interest income.

[Joe Chybowski, President and CFO at Bridgewater Bancshares]

As I mentioned earlier, year-to-date expenses have been higher than expected due to opportunistic hiring and annual merit increases in the first quarter. As a result, we believe most of the expense growth for the year was front-loaded, and that expenses in the third and fourth quarters should be relatively stable with second quarter levels. I'll now turn it back to Jerry.

[Jerry Baack, Chairman and CEO at Bridgewater Bancshares]

Thanks, Joe. Before we open up for questions, I want to provide a quick progress report on our 2026 strategic priorities. We remain focused on taking market share in a profitable way. We have been disciplined in growing our loan portfolio, given the seasonally lower deposits so far this year. This has resulted in improved profitability with a much higher net interest margin and strong net interest income growth. We have also continued to make impressive progress with a continued focus on our affordable housing vertical, as balances are up 19% annualized year-to-date. With that, we'll open it up for questions.

[Operator]

Thank you. As a reminder, to ask a question, please press star and then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star and then two. At this time, we will pause momentarily to assemble the roster. The first question will come from Jeff Rulis with D.A. Davidson. Please go ahead.

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

Thanks, and good morning. Maybe a question on the loan growth side, and particularly the payoffs. It seems like that's more of a well, two-part on the payoffs is one just kind of characterizing. Sounds like it's more event driven, less about rate. You talked about sale of assets and competition. Just wanted to kind of unpack the type of payoffs that you're seeing. Then the second thing is any visibility. It sounds like you're still expecting more to come, but is there anything that what you can see the pace of payoffs ahead?

[Nick Place, Chief Banking Officer at Bridgewater Bancshares]

Hey, Jeff, this is Nick. I think the payoff activity is really what we've been talking about over the last handful of quarters, which is a bit of a catch-up of the natural sort of life cycle of some of the transactions for our clients, where they're a lot of times buying, improving, and then ultimately stabilizing and either refinancing to permanent debt or selling the assets. Given where rates have been in the last couple of years, I think some of that is just the natural evolution of those transactions coming to conclusion for us. Nothing concerning on that front, but I just think it's a catch-up from where we were at from a seasonally low or a typically low perspective a year to 1.5-year ago.

[Nick Place, Chief Banking Officer at Bridgewater Bancshares]

On the go forward payoff side, I think it can be real difficult to predict, but the levels that we've seen over the last three quarters, that seems to be the consistent pace for us now. That's the level that we're modeling as we're thinking about what we're expecting over the back half of the year.

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

Thanks, Nick. Maybe one on the margin. I guess is it, not to oversimplify, but safe to say that further margin expansion, a little more earning asset dependent at this point? The funding costs are stabilizing and maybe less help that way, and just trying to unpack the components of that sounds like it's still up on the margin, but less so because it's maybe just one side of the balance sheet in terms of earning asset yield gains. Is that fair to say?

[Joe Chybowski, President and CFO at Bridgewater Bancshares]

Yeah, Jeff, this is Joe. I think that's the right way to think about it. I think last year, as we said, was definitely a deposit cost story, especially with Fed rate cuts. Yeah, this year it's certainly been the loan portfolio has been driving that, whether it's through growth or through just continued repricing of that portfolio. We definitely still focus on the deposit side and certainly looking for opportunities to rationalize deposit costs lower. Yeah, to your point, we expect that margin expansion to come from the earning asset side.

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

Got it. Maybe one last one if I could squeeze it in, maybe for Katie on the maybe that multi-family loan that was added to nonaccrual. Any specific reserves against that and maybe a timeline for resolution that you see for that one?

[Katie Morrell, Chief Credit Officer at Bridgewater Bancshares]

Sure. Hi, Jeff. We are carrying a specific reserve against that loan. It's a little less than $1 million. That is part of what's making up the specific reserves in our allowance currently. As far as the timeline, we're moving quickly. We've shared that a near-term resolution is our goal on this one. Ultimately there's some parts of that are out of our control. I think we've showed that we've been able to move quickly through other assets similarly that have been on nonaccrual. Certainly focusing on moving as quickly as possible while achieving the best outcome for the bank.

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

Katie, just remind us the balance of the two largest credits that you mentioned, the office loan and I assume this one here. Just the total balances of those two.

[Katie Morrell, Chief Credit Officer at Bridgewater Bancshares]

Yeah, together those two are making up about 90% of that NPA balances. The mixed-use multifamily is about $10.5 million, and then $8.6 million on the office loan.

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

Great, thank you.

[Operator]

The next question will come from Nathan Race with Piper Sandler. Please go ahead.

[Nathan Race, Analyst at Piper Sandler]

Hi, everyone. Good morning. Thanks for taking the questions.

[Joe Chybowski, President and CFO at Bridgewater Bancshares]

Morning, Nathan.

[Nathan Race, Analyst at Piper Sandler]

Staying on the margin topic, curious if you guys can comment just what you're seeing from a competitive deposit pricing perspective in the Twin Cities these days, and conversely, on the other side of the balance sheet, what you're seeing from a loan pricing perspective as well, and just in terms of the weighted average rate on new loan production these days.

[Nick Place, Chief Banking Officer at Bridgewater Bancshares]

Hey, Nathan. It's Nick. Yeah, on the deposit front, competition's still pretty strong out there as I think lenders are getting more aggressive on the asset side and it's causing them to remain focused on growing deposits. We feel like we're still getting in front of good opportunities. I think our market, with just the makeup of the deposit market and being so heavily weighted to Wells Fargo and U.S. Bank, we still see a lot of opportunity to pick up deposits at relatively low costs from those folks. On the commercial side, bringing in full deposit relationships, we're seeing money market balances and rates still in the 3%. We blend those sort of client costs down with operating accounts to get inside of that.

[Nick Place, Chief Banking Officer at Bridgewater Bancshares]

We feel like there's still deposit momentum that we can gather in the back half of the year, as we tend to have more success seasonally in the back half. Those deposit costs continue to come down. With where we've been at from a loan-to-deposit ratio perspective, we've been mindful about not cutting those costs too much. The loan side, that competition is for real quality assets is, in some cases, gotten a bit silly, frankly. We've seen spreads on deals at 150 basis points over SOFR and those are just levels that we're not even going to try to compete at. We're going to focus on our core client relationships, or our affordable housing vertical where we can get spreads meaningfully outside and wide of what we can do on the sort of core CRE front here locally.

[Nick Place, Chief Banking Officer at Bridgewater Bancshares]

I think we've been trying to be disciplined on finding the right deals that we can put on the balance sheet that are good from a credit risk perspective but are also priced at a level that makes sense for us. Also, I think Joe touched on the progress we made on the variable rate nature of the book. I think that's another structural thing that we're trying to focus on, too. We could put growth on for long-term fixed rate assets, and that's also not something we're as interested in doing as we were in 2021, as we felt the pain of that as rates moved up. I think the growth engine's there, and we're optimistic about putting on loans at good yields, and that's really our focus.

[Nathan Race, Analyst at Piper Sandler]

Okay, great. If I could just follow up on the deposit pricing competition. Nick, would you say that's changed much in the last 90 days, or has there been any major differences competitively along those lines?

[Nick Place, Chief Banking Officer at Bridgewater Bancshares]

No, I don't think it's changed much. I think it's quality opportunities and relationships that are kind of falling out of some of the M&A disruption or competition's been pretty fierce on those for a handful of quarters. I don't think it's really changed too much on the deposit front. I think for us it's just a focus. The front half of the year being a little seasonally lower for deposits, that's where we tend to get a little bit more aggressive on the opportunities that we have.

[Nathan Race, Analyst at Piper Sandler]

Okay, great. Just in terms of the loan production capacity of the expanded team, as you guys have made a number of hires over the last several quarters. Curious, as you look out to next year and some of these folks continue to ramp up and bring over some clients from prior institutions, how do you think that can kind of change or increase the production relative to, call it $200 million or so on average over the last four or five quarters?

[Nick Place, Chief Banking Officer at Bridgewater Bancshares]

I don't think we're anywhere near our max capacity on the loan production side as it relates to talent. I think the folks that we have here are phenomenal and the client relationships that we have are great. The new folks that we've picked up are expanding that client base for us. I think we've got room to go on our loan production compared to what we've seen through the first few quarters this year. I think a lot of that loan growth isn't necessarily that we're not getting in front of transactions.

[Nick Place, Chief Banking Officer at Bridgewater Bancshares]

Like I said, sometimes just pricing doesn't make sense, structure doesn't make sense, we're mindful about aligning our loan growth with core deposits. The opportunities in our pipeline is big, I think we're being sort of disciplined on putting on growth that makes sense. I think our folks are doing a great job, there's certainly capacity there to expand our loan production as some of the other metrics make sense.

[Nathan Race, Analyst at Piper Sandler]

That's really helpful. I appreciate all the color. Thanks, Nick.

[Operator]

The next question will come from Brandon Rud with Stephens. Please go ahead.

[Matthew Braver, Analyst at Stephens]

Good morning. This is Matthew Braver on for Brandon. Thank you for taking my question. On page 20 of the slides, you highlighted about $600 million of time and broker deposits that are scheduled to reprice. At what rate are those expected to reprice?

[Joe Chybowski, President and CFO at Bridgewater Bancshares]

Yeah. They're just over 4%, kind of between 4% and 4.5%. We're constantly looking at new opportunities. Complementing the rest of the balance sheet, whether it's shorter term or in a lot of cases further out the curve with embedded optionality. If some of that's roll off, as we said, and we continue to look for those opportunities to supplement core deposit growth.

[Matthew Braver, Analyst at Stephens]

Great, thank you. Maybe one on the loan portfolio. I noticed the variable rate loan mix has been trending higher the last few quarters. Is there a target level you'd like that mix to reach?

[Nick Place, Chief Banking Officer at Bridgewater Bancshares]

This is Nick. Yeah, I think our near-term goal is we're really trying to align our variable rate loan book with our variable rate deposit portfolio. We've got a little bit of room to go to get to that level. Long-term, we'd like to see the variable rate part of our book be a bit more balanced with our fixed rate portfolio. Getting to that 30%, 40% of the portfolio long-term would be an ideal range. That's a slow ship to turn, we think it'll take some time for us to get to that level.

[Matthew Braver, Analyst at Stephens]

Okay, thank you for the color.

[Nick Place, Chief Banking Officer at Bridgewater Bancshares]

Thanks.

[Operator]

Again, if you have a question, please press star and then one. The next question will come from Brendan Nosal with Hovde Group. Please go ahead.

[Brendan Nosal, Analyst at Hovde Group]

Hey, good morning, everybody. Hope you're doing well.

[Joe Chybowski, President and CFO at Bridgewater Bancshares]

Morning, Brendan.

[Brendan Nosal, Analyst at Hovde Group]

Let me start off here on the expense base. Totally get the call-out of flat expenses from the second quarter level through the end of the year. Was this more of a timing discrepancy, or was there some intentionality to how you're going to manage expenses in the back half as loan growth came in slower than you were thinking earlier in the year?

[Joe Chybowski, President and CFO at Bridgewater Bancshares]

Hey, Brendan, it's Joe. As you know, we continue to invest in people and technology. That's been a theme since we went public. Obviously, we've been fortunate with continued market disruption here in the Twin Cities. We're always looking for opportunities to add talent. I think obviously a lot of disruption came in the tail end of 2025 into 2026. We're not going to kind of peanut butter spread those hires throughout the year.

[Joe Chybowski, President and CFO at Bridgewater Bancshares]

I think we're going to take advantage where we see opportunities, in some cases pull those forward. I think that's certainly nothing new. As we think about it, we feel comfortable with both the production and non-production staff, and that's part of where we said some of it's front-loaded certainly. As we think about the back half of the year, we feel like it can be relatively flat from an expense standpoint. Certainly nothing new, and we'll continue to be opportunistic if opportunities arise. I think we always want to invest in the business and the scalability of the company.

[Brendan Nosal, Analyst at Hovde Group]

Okay. All right. Thanks, Joe. Maybe on a kind of related note here. If I look at your expense-to-asset ratio over the past, I don't know, six quarters, it's been moving higher up to 1.65% this quarter. Joe, as you mentioned on those opportunistic hires, as those team adds start to kind of produce and generate assets, is there a medium-term opportunity to leverage those team adds and bring that expense-to-asset ratio back down to where it had been running?

[Joe Chybowski, President and CFO at Bridgewater Bancshares]

I certainly think it's possible. I think when we look at whether it's that ratio or we look at just pure operating leverage, this quarter is a great example where you see revenue growth at a 20% clip and expenses at 13%. That's an ideal kind of ratio between those two. I think as we invest in the business and the growth translates and production folks continue to migrate their relationships over, certainly we're optimistic about the growth prospects of the company. We're also not going to be shortsighted to not continue to invest in our people and technology. I think that ratio, while it has glided higher, I think by no means are we concerned that it's out of whack.

[Brendan Nosal, Analyst at Hovde Group]

Okay, perfect. Thanks for taking my questions.

[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 Bancshares]

Thanks for joining the call today. Bridgewater's really excited about the growth and profitability outlook in the second half of 2026. I also just want to do a shout-out to our Bridgewater team members that have done a phenomenal job this year and the years to come. Have a great day. Thanks.

[Operator]

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

Participants

Executives

• Justin Horstman, VP of Investor Relations
• Jerry Baack, Chairman and CEO
• Joe Chybowski, President and CFO
• Nick Place, Chief Banking Officer
• Katie Morrell, Chief Credit Officer

Analysts

• Jeff Rulis, Analyst at D.A. Davidson
• Nathan Race, Analyst at Piper Sandler
• Matthew Braver, Analyst at Stephens
• Brendan Nosal, Analyst at Hovde Group