Bridgewater Bancshares Inc Q4 FY2024 earnings call

• The company finished 2024 with strong quarter, robust balance sheet growth, net interest margin expansion, and superb asset quality. - Completed acquisition of First Minnetonka City Bank in mid-December, with smooth onboarding. - Core deposit growth momentum continued in Q4 with balances up $211 million, and renewed focus on core deposits paid off. - Loan growth rebounded in Q4, aligning core deposit growth with loan growth over time. - Asset quality remained strong with net charge-offs and non-performing assets improving after office property sale in December.

Core deposits saw balances increase $211 million, or 31% annualized in the fourth quarter, excluding deposits from the First Minnetonka City Bank acquisition. Full-year core deposit growth including the acquisition was 22%. Loan balances increased 7% annualized in the fourth quarter, excluding acquired loans, with full-year loan growth 4% including the acquisition. Net interest margin expanded 8 basis points in the fourth quarter to 2.32% in December. Non-interest income was up $1 million (66%) in the fourth quarter due to elevated construction activity leading to higher letter of credit fees and swap fees.

• 2025 loan growth expected to be in mid- to high single-digit range. - Modest net interest margin expansion anticipated in 2025, dependent on future Fed moves and yield curve shape. - Non-interest expense growth excluding merger-related expenses expected in high-teens range in 2025. - Anticipates 30% cost savings from First Minnetonka City Bank acquisition in 2025 and systems conversion in Q3. - Purchase accounting accretion expected to contribute 1 to 2 basis points per quarter to margin in 2025.

• Office portfolio risk: Limited exposure (5% of total loans) but market stress for certain properties, with one loan having lease rollover risk. - Interest rate risk: Impact on margin expansion depending on Fed policy changes. - Competition risk: Stiff competition leading to tighter loan spreads.

Q: Brendan Nosal asks about the improved growth outlook for 2025, tying into credit supply, loan demand, and funding complex.

A: Nick Place responds that the growth engine is in place, with core deposit growth and acquisition positioning the bank to take advantage of market opportunities.

Q: Brendan Nosal asks about the expense outlook and core relationship between asset growth and cost growth.

A: Joe Chybowski responds that the high-teens expense guide includes integration of First Minnetonka City Bank costs, but the core relationship remains intact.

Q: Jeff Rulis asks about the December margin average and margin growth guide.

A: Joe Chybowski states the December margin was 2.36% and the modest growth includes purchase accounting accretion.

Q: Nathan Race asks about funding base repricing and replacement rate.

A: Joe Chybowski responds that they are seeing opportunities to reprice deposits, with options to call brokered CDs and use money market opportunities.