Bridgewater Bancshares, Inc. (BWB) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The company demonstrated strong financial performance with deposit cost reductions and stable asset quality. The Q&A revealed confidence in deposit growth and loan repricing, alongside strategic plans for expenses and organic growth. While some uncertainties exist, such as competition impacts and nonaccrual loans, the overall outlook remains optimistic, particularly with expected NIM expansion and strategic hires. Therefore, a positive stock price movement is anticipated.
Key Financial Performance
Net Interest Margin (NIM) Expanded 12 basis points to 2.75% in Q4 2025, driven by lower deposit costs. This marks a recovery due to three Federal Reserve rate cuts in late 2025.
Net Interest Income Increased by 5% during Q4 2025, attributed to margin expansion and continued earning asset growth.
Core Deposit Growth Grew 9% in Q4 2025 and 8% for the full year, enabling a 9% loan growth in Q4 and 11% for the year. Growth was supported by market opportunities and affordable housing initiatives.
Tangible Book Value Per Share Increased 16.5% annualized in Q4 2025 and 15.3% year-over-year, reflecting consistent shareholder value growth.
Nonperforming Assets (NPAs) Increased modestly to 0.41% of assets in Q4 2025, driven by a multifamily loan issue. However, a resolution is expected soon.
Net Charge-Offs Recorded $1.2 million in Q4 2025 due to a fully reserved C&I loan. Full-year net charge-offs remained low at 0.04% of average loans.
Allowance Ratio Declined slightly from 1.34% to 1.31% in Q4 2025, attributed to the charge-off.
Adjusted Return on Assets (ROA) Just under 1% in Q4 2025, with total revenue increasing 32% year-over-year.
Noninterest Income Increased in Q4 2025, driven by $651,000 in swap fee income and higher letter of credit fees. Swap fees averaged $500,000 per quarter over the past five quarters.
Adjusted Efficiency Ratio Declined to 50.7% in Q4 2025, the lowest since Q1 2023, due to well-controlled expenses and strong revenue growth.
Loan Growth Increased 8.9% annualized in Q4 2025 and 11.4% for the year, driven by strong demand and affordable housing initiatives.
Affordable Housing Loan Balances Increased 27% annualized in Q4 2025 and 29% for the year, contributing significantly to loan growth.
Multifamily Portfolio Net Charge-Offs Recorded only $62,000 since 2005, showcasing strong credit quality and resilience.
Deposit Costs Decreased 22 basis points to 2.97% in Q4 2025, driven by Federal Reserve rate cuts.
Classified Loan Levels Remained low at 1.2% of total loans and 8.3% of capital in Q4 2025.
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Operating Highlights
New online banking platform: Launched successfully in 2025, enhancing technology advancements.
Twin Cities market share: Continued to gain market share, becoming the second largest locally led bank in the Twin Cities.
Affordable housing vertical: Expanded reach both locally and nationally, with a 29% increase in balances in 2025.
Net interest margin: Expanded by 12 basis points to 2.75% in Q4 2025, with a target of 3% by the end of 2026.
Core deposit growth: Achieved 9% growth in Q4 2025 and 8% for the full year.
Loan growth: Loans grew by 11% in 2025, exceeding initial guidance.
Expense management: Controlled expenses with a 9.5% annualized increase in Q4 2025, aligning with asset growth.
Profitability optimization: Focused on aligning loan growth with core deposit growth and expanding net interest margin.
M&A readiness plan: Implemented in 2025 to capitalize on future opportunities.
Technology investments: Leveraging recent investments and developing a formal AI strategy.
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Risk or Challenges
Nonperforming Assets and Net Charge-offs: There was a modest uptick in nonperforming assets (NPAs) to 0.41% of assets, driven by a multifamily loan that migrated to nonaccrual. Additionally, $1.2 million in net charge-offs were recorded during the quarter, though these were isolated issues.
Loan Growth and Deposit Alignment: Loan growth is dependent on core deposit growth, and the company aims to maintain a loan-to-deposit ratio of 95%-105%. Any misalignment could impact liquidity and financial stability.
Affordable Housing Vertical: While the affordable housing vertical is a growth area, it requires significant investment and carries risks related to market demand and execution.
Interest Rate Environment: The company’s net interest margin (NIM) is sensitive to interest rate changes. While recent rate cuts have been beneficial, future rate stability or increases could impact deposit costs and loan yields.
M&A Integration and Disruption: The integration of First Minnetonka City Bank and potential future M&A activities pose operational and strategic risks, including system conversions and client retention.
Office Loan Exposure: The company has limited exposure to office loans (under 5% of total loans), but performance in this segment could be impacted by broader market conditions, especially in central business districts.
Technology Investments: Ongoing investments in technology, including AI, are critical for growth and efficiency but carry risks related to implementation and cost management.
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Guidance & Outlook
Revenue Growth: The company expects to achieve a 3% net interest margin (NIM) by the end of 2026, earlier than the previously projected early 2027 timeline. This projection does not assume any additional Federal Reserve rate cuts.
Loan Growth: Loan growth is expected to remain in the high single digits for 2026, contingent on core deposit growth and maintaining a loan-to-deposit ratio in the range of 95% to 105%.
Core Deposit Growth: Core deposit growth is anticipated to continue, though it may be less linear in 2026, particularly in the first half of the year. The company plans to leverage broker deposits if necessary.
Affordable Housing Vertical: The affordable housing vertical is expected to remain a key contributor to loan growth, with plans to expand this segment both locally and nationally. Enhancements to permanent product offerings are also planned to drive additional loan and swap fee income.
Expense Growth: Expense growth is expected to align with asset growth in 2026, following higher-than-usual expense growth in 2025 due to acquisition-related activities.
Swap Fee Income: Swap fees are expected to remain a portion of the revenue story in 2026, though they may slow due to the current yield curve environment.
Capital Position: Capital levels are expected to remain stable in the near term, supported by earnings retention and a strong growth outlook.
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Shareholder Return Plan
Share Repurchase Program: The company did not repurchase any shares during the quarter due to a strong organic growth pipeline and the current stock trading levels. However, as of year-end, $13.1 million remained under the current share repurchase authorization.
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Key Q&A
Q:Can you unpack the deposit growth in the quarter, including any seasonality and the impact of recent hires?
A:Nicholas Place explained that Q4 is typically a seasonally high watermark due to clients building balances late in the year, with some outflows in Q1. He expressed confidence in the deposit pipeline, citing strong client relationships and talent acquisition. He noted that Q1 and Q2 are usually more modest, and broker deposits may supplement core deposits if needed.
Q:Can you speak to the cadence of the $743 million in loans repricing higher this year?
A:Joseph Chybowski stated that the repricing is well spread out without significant concentration in any quarter. He emphasized that the repricing will be the main driver for achieving a 3% net interest margin (NIM) by year-end.
Q:What is the outlook for expenses in 2026?
A:Joseph Chybowski indicated that expenses are expected to grow in the high single-digit range, consistent with asset growth. He mentioned that investments in people and technology will be managed accordingly.
Q:Are there plans for additional production-related hires given the M&A-related disruption?
A:Nicholas Place stated that the team is evaluating capacity and internal processes to gain operational leverage. While they will be opportunistic in hiring, they are also focused on leveraging existing staff and streamlining operations.
Q:Are there any non-solicits in place with recent production hires?
A:Nicholas Place mentioned that it varies by individual, but most recent hires have not had non-solicits.
Q:How does the margin outlook change with potential rate cuts in 2026?
A:Joseph Chybowski explained that rate cuts would pull forward the 3% margin target. He noted that deposit costs would stabilize mid-year if rate cuts occur, directly impacting the margin.
Q:What is the status of the CBD office loan that slipped to nonaccrual?
A:Katie Morrell stated that it is expected to be a longer-term workout, with the borrower given time to re-lease vacant space. A specific reserve remains on the loan.
Q:What is the M&A environment and appetite for acquisitions in 2026?
A:Gerald Baack reiterated a focus on organic growth while remaining open to tuck-in acquisitions similar to the First Minnetonka City Bank deal. He expressed optimism about potential deals in the coming years.
Q:What is the growth potential and concentration limit for the affordable housing vertical?
A:Nicholas Place stated that the affordable housing vertical is about 15% of the portfolio and is expected to grow faster than the overall portfolio in the near term. No specific concentration limit has been set, but growth is being approached methodically.
Q:What is the outlook for swap fees in relation to the affordable housing vertical?
A:Nicholas Place noted that swap fees are expected to be slightly lower this year due to market conditions. However, efforts are underway to educate teams and clients on leveraging interest rate swaps, with swap fees expected to grow as part of the business.
Q:What caused the uptick in nonaccruals and net charge-offs?
A:Katie Morrell clarified that the upticks were tied to isolated loans—a multifamily loan for nonaccruals and a C&I loan for net charge-offs. She emphasized that these were not systemic issues.
Q:Are there any systemic issues in the multifamily portfolio?
A:Katie Morrell stated that the multifamily portfolio is performing well overall, with challenges limited to specific geographic pockets. Market fundamentals and property performance are improving.
Q:What is the timeline and purpose of modernizing the core banking system?
A:Joseph Chybowski explained that modernizing the core banking system is a long-term initiative aimed at improving internal efficiencies, client service, and adaptability to emerging technologies. The project has been ongoing for years.
Q:Is increased competition in the Twin Cities affecting loan spreads or deposit rates?
A:Nicholas Place acknowledged increased competition, particularly in loans, but expressed confidence in the bank's ability to grow despite this. He noted that the pipeline remains strong, and the bank is focused on quality opportunities.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the timeline for modernizing the core banking system, stating only that it is a long-term initiative. Additionally, they did not provide precise figures for potential expenses related to production hires or the exact impact of competition on loan spreads and deposit rates.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
American National
Baack CEO
Baack Chairman
Bank expense
Bank market
Bremer acquisition
CEO Baack
CI loan
CI portfolio
Cities client
Cities location
Fed rate
Slide loan
ability core
asset charge
branch
demand
deposit basis
deposit interest
deposit loan
effort
end rate
fee income
fee swap
housing
income swap
increase origination
increase payoff
loan book
loan digit
opportunity market
people
portion
sale
size
story
strength
swap fee
system conversion
talent
uptick
yield rate
BWB Transcript
Bridgewater Bancshares, Inc. (BWB) Q4 2025 Earnings Call Transcript
Positive1-28
The company demonstrated strong financial performance with deposit cost reductions and stable asset quality. The Q&A revealed confidence in deposit growth and loan repricing, alongside strategic plans for expenses and organic growth. While some uncertainties exist, such as competition impacts and nonaccrual loans, the overall outlook remains optimistic, particularly with expected NIM expansion and strategic hires. Therefore, a positive stock price movement is anticipated.
Bridgewater Bancshares, Inc. (BWB) Q3 2025 Earnings Call Transcript
Unknown10-22
The earnings call presents a mixed outlook. While there is optimism in loan growth and affordable housing, the lack of clarity on rate cuts' impact and increased noninterest expenses are concerns. The Q&A revealed steady but slow margin improvement and potential growth from market disruptions, but also highlighted uncertainties in merger costs and specific loan risks. The absence of strong catalysts or negative surprises suggests a neutral stock price movement in the short term.
Bridgewater Bancshares, Inc. (BWB) Q2 2025 Earnings Call Transcript
Positive7-24
The earnings call highlights strong financial performance, including a 12.5% loan growth rate, increased net interest income, and strong asset quality with low nonperforming assets. The expansion of the share repurchase program and increased tangible book value per share are positive indicators. Despite some uncertainties in swap fees and vague M&A responses, management's optimistic guidance on margin expansion and cost management suggests a favorable outlook, likely leading to a stock price increase in the next two weeks.
Bridgewater Bancshares, Inc. (BWB) Q1 2025 Earnings Call Transcript
Unknown4-24
The earnings report shows strong financial metrics such as increased EPS, loan growth, and revenue, which are positive indicators. However, concerns about market volatility, economic uncertainty, and increased competition pose risks. The Q&A section highlights some uncertainties in loan portfolio management and market competition. The share repurchase program is a positive, but the lack of specific guidance on non-accrual loan resolution and economic conditions tempers optimism. Overall, these mixed signals suggest a neutral market reaction in the near term.
BWB Slides
Bridgewater Bancshares Q4 2025 slides: NIM expansion drives 32% revenue growth2026-01-27
Bridgewater Bancshares Q3 2025 slides: Growth continues despite earnings miss2025-10-21
Bridgewater Bancshares Q2 2025 slides: NIM expansion drives earnings growth2025-07-23
Bridgewater Bancshares Q1 2025 slides: NIM expansion drives earnings growth2025-04-23
BWB Report
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