Bridgewater Bancshares, Inc. Q1 FY2026 earnings call

• Net interest margin expansion: Near 3% in Q1 with deposit costs decline and loan repricing. Continued net interest income growth despite balance sheet shrinkage from security sales.
• Balance sheet efficiency actions: Sold securities for net gains and prepaid higher cost FHLB advances, improving funding mix and future profitability.
• Loan and deposit growth: Loan portfolio grew 5.5% annualized, core deposits increased 3.2% annualized, with strong pipeline and improved deposit mix.
• Credit profile: Strong with low net charge-offs and non-performing assets, well-reserved at 1.31% of total loans.
• Strategic priorities: Focus on taking market share profitably, growing affordable housing vertical, and leveraging AI in technology.

Net interest margin expanded to 2.99% in Q1, nearly reaching the expected 3% by end of 2026. Deposit costs declined and loans repriced higher. Loan portfolio grew 5.5% annualized with core deposit balances increasing 3.2% annualized. Asset quality remained positive with net charge-offs and non-performing assets declining. CET1 increased 36 basis points to 9.53%. Tangible book value increased 9.9% annualized to $15.93 per share. Core deposit momentum continued with 3.2% annualized growth and improved deposit mix. Loan pipeline was strong with CNI being a large growth category, especially in affordable housing.

• Net interest margin: Expect slow additional expansion over coming quarters, with margin resetting higher and earning asset growth set to return.
• Loan growth: On track for high single-digit loan growth in 2026, dependent on core deposit growth and competitive dynamics.
• Expenses: Adjusted non-interest expense expected to track with asset growth over time, though first quarter had elevated expenses due to seasonality and investments.
• Capital: Comfortable with current capital levels and optionality of ATM, with organic growth prospects being key.

Q: Brendan Nozle from HVD Group asked about capital and ATM tap, A: Joe said they're opportunistic with ATM, comfortable with current capital and optionality.

Q: Brendan asked about hires and M&A, A: Nick said they're well-positioned to take advantage of M&A disruption with C&I hires.

Q: Brendan asked about securities impact on NIM, A: Joe said security sale contributed but was small, bigger impact from deposit cost decline.

Q: Jeff Rulis from DA Davidson asked about M&A and margin tail benefit, A: Jerry said M&A activity slowed but organic growth is priority, Joe said securities sale had tail benefit and deposit betas outperformed.

Q: Nathan Race from Piper Sandler asked about yield pickup on loans, A: Joe said yield pickup is balanced throughout year.

Q: Nathan asked about deposit gathering and competitors, A: Nick said competitive market with low-hanging fruit on deposits from hired teams.

Q: Nathan asked about expenses and 2Q expenses, A: Joe said expenses have step up due to merit, headcount, and marketing, but long-term aligned with asset growth.

Q: Brandon Rood from Stevens asked about deposits and multifamily portfolio, A: Joe said deposits closer to period end, Nick said multifamily portfolio not a broader trend with strong pipeline.