Bridgewater Bancshares Inc Q1 FY2025 earnings call

• Strong balance sheet growth and net interest margin expansion; core deposit growth of 8% annualized in the first quarter. - Loan demand increased, with pipelines at the highest level since 2022, and first-quarter loan balances up 16% annualized. - Net interest margin expanded 19 basis points driven by lower deposit pricing, higher loan yields, and accretion benefit. - Asset quality superb with no net charge-offs, non-performing assets at 0.2% of assets. - Tangible book value bounced back with a 12% annualized increase, and $600,000 of common stock repurchased. - Monitoring market volatility and reviewing portfolio for risk; traction in affordable housing vertical. - Teams on track for technology initiatives including upgraded online banking and systems conversion of acquisition.

In the first quarter, core deposit balances saw an 8.3% annualized increase, with $368 million of core deposit growth over the past three quarters. Loan balances increased 16% annualized. Net interest margin expanded 19 basis points to 2.51%, with the core margin (excluding loan fees and purchase accounting accretion) increasing 13 basis points to 2.37%. Net interest income was up 12%. Non-interest income was $2.1 million, with $325,000 from investment advisory fees. Total revenue was up 23% year-over-year. Expense growth tracked in line with expectations, and the adjusted efficiency ratio moved back into the low 50s.

• Expect loan growth in the mid to high single digits for full-year 2025, with potential to outperform. - Margin expansion pace to moderate in the second quarter due to stabilizing deposit costs and less accretion impact; future rate cuts could benefit margin. - Expense growth for 2025 non-interest expense in the high teens, excluding merger-related expenses. - Provision dependent on loan growth pace and asset quality; two significant technology initiatives in 2025.

• Market volatility and uncertainty from tariffs creating a challenging operating environment. - Central Business District office loan risk, with one moved to non-accrual and another from special mention to substandard and non-accrual. - Economic uncertainty potentially leading to clients being more cautious on projects.

Q: Good morning. Just a question on the CRE front from your perspective. I guess are you seeing any change in competition?

A: Hey, Jeff. This is Nick. I think as a lot of the liquidity constraints in the market have subsided over the last three quarters, we've seen some players that have been on the sidelines get more active again. So, you know, that has tightened spreads a bit, as there's been a bit more competition.

Q: Good morning. Just curious how you're thinking about kind of exit point for the margin come out of this year to the extent we maybe get a couple of Fed cuts in the back half of the year?

A: Yeah. Well, I think as we've said in the past, I mean, we've spent a lot of time last year positioning the deposit and funding portfolio to benefit from rate cuts. And obviously, we saw that in the fourth quarter and we really saw it in the first quarter. So I mean, we got $1 billion of the funding base is explicitly linked to short-term rates. And so if you see one cut, three cuts, five cuts, it's obviously going to be beneficial for us the more the better from the deposit standpoint.

Q: Hey, good morning guys. Most of mine have been asked so far, but maybe one more, just on the buyback, Joe, you spoke to this a little bit in your prepared remarks. We're just kind of curious on the decision process over the next few quarters on additional share repurchases?

A: Thanks. Yeah. I think our messaging hasn't changed there either. I think it's not one thing that's driving that. I think we're constantly evaluating valuations, needs, opportunities, to Jerry's point on the M&A front. So I think right now, we feel really good about the growth prospects, and we certainly want to have capital to continue the growth and the trajectory that we see. I think we're gonna weigh that. Obviously, periods of volatility, I mean, we support the stock. And so but I think there's no one thing that's driving it. And we're constantly evaluating every day.