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Bridgewater Bancshares Inc (BWB)·Q2 2025 Earnings Summary

Executive Summary

  • Bridgewater Bancshares delivered a clean beat: diluted EPS of $0.38 (adjusted $0.37) versus S&P Global consensus $0.34; revenue of ~$34.1M versus consensus $32.2M, driven by net interest margin expansion, record fee income, and robust loan growth. Management cited higher core loan yields, lower deposit costs, and swap fee momentum as key contributors . EPS/Revenue consensus and actuals from S&P Global*.
  • Net interest margin rose 11 bps q/q to 2.62% (core NIM +12 bps to 2.49%); net interest income grew 7.4% q/q to $32.5M; record noninterest income was $3.6M, including $0.94M in swap fees and non-core items (FMCB securities gain $0.47M; FHLB prepayment $0.30M) .
  • Balance sheet growth remained strong: gross loans +$125.7M (+12.5% annualized) and deposits +$74.3M (+7.2% annualized); tangible book value per share increased to $14.21; asset quality remains pristine with 0.00% annualized net charge-offs and NPAs at 0.19% of assets .
  • Guidance: management expects slight NIM expansion in Q3 (tempered by a 7 bps drag from the June sub-debt refinancing and lower accretion), resuming more expansion in Q4; loan growth targeted at mid-to-high single digits in 2H25; FY25 noninterest expense growth in the high teens (ex-merger) with capital levels stable .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin expanded to 2.62% (+11 bps q/q; +38 bps y/y) on higher core loan yields and lower deposit costs; core NIM rose to 2.49% (+12 bps q/q; +32 bps y/y) .
  • Record noninterest income ($3.6M), including swap fees ($0.94M) and gains from FMCB securities ($0.47M) and FHLB prepayment income ($0.30M); “Strong revenue growth…driven by additional net interest margin expansion, a record level of fee income, and robust loan growth” — CEO Jerry Baack .
  • Robust organic growth: loans +$125.7M (+12.5% annualized) and deposits +$74.3M (+7.2% annualized); TBVPS up to $14.21; efficiency ratio improved to 52.6% (adjusted 51.5%) .

What Went Wrong

  • Modest credit migration: watch/special mention loans increased to $53.3M; substandard loans rose to $45.0M, though NPAs remain low (0.19%) and net charge-offs were 0.00% .
  • Higher FDIC insurance assessments and charitable contributions lifted other expenses; noninterest expense rose to $18.9M (+$0.8M q/q); merger-related expenses were $0.54M .
  • Near-term NIM headwind: sub-debt issuance at 7.625% (redeeming $50M of 5.25% notes) expected to reduce Q3 margin by ~7 bps; accretion tailwind diminishing, muting Q3 expansion .

Financial Results

Company Reported Operating Results

MetricQ2 2024Q1 2025Q2 2025
Net Interest Income ($USD)$24.996M $30.208M $32.452M
Noninterest Income ($USD)$1.763M $2.079M $3.627M
Net Operating Revenue ($USD)$26.439M $32.286M $35.304M
Diluted EPS ($USD)$0.26 $0.31 $0.38
Adjusted Diluted EPS ($USD)$0.25 $0.32 $0.37
Net Income ($USD)$8.115M $9.633M $11.520M

Margins and Efficiency

MetricQ2 2024Q1 2025Q2 2025
Net Interest Margin (tax-equivalent)2.24% 2.51% 2.62%
Core NIM (tax-equivalent)2.17% 2.37% 2.49%
Cost of Total Deposits3.46% 3.18% 3.16%
Efficiency Ratio (GAAP)58.7% 55.5% 52.6%
Adjusted Efficiency Ratio58.7% 53.7% 51.5%

Balance Sheet and Asset Quality

MetricQ2 2024Q1 2025Q2 2025
Total Assets ($USD)$4,687.0M $5,136.8M $5,296.7M
Gross Loans ($USD)$3,800.4M $4,020.1M $4,145.8M
Deposits ($USD)$3,807.7M $4,162.5M $4,236.7M
Loan/Deposit Ratio99.8% 96.6% 97.9%
NPAs / Total Assets0.01% 0.20% 0.19%
Net Charge-Offs / Avg Loans (ann.)0.00% 0.00% 0.00%
ACL / Total Loans1.37% 1.34% 1.35%
CET1 (Consolidated)9.41% 9.03% 9.03%
Tangible Book Value per Share$13.53 $13.89 $14.21

Estimates vs Actuals (S&P Global)

MetricQ2 2025 ConsensusQ2 2025 Actual
Primary EPS Consensus Mean0.343*0.38
Revenue Consensus Mean ($USD)$32.15M*$34.079M*
  • Primary EPS – # of Estimates: 3*; Revenue – # of Estimates: 2*.
  • Values marked with * retrieved from S&P Global.

Loan Segment Breakdown (Selected)

Loan Type ($USD)Q2 2024Q1 2025Q2 2025
Commercial$518.8M $528.8M $549.3M
Construction & Land Development$134.1M $128.1M $136.4M
1-4 Family Mortgage$416.9M $479.5M $474.3M
Multifamily$1,404.8M $1,534.7M $1,555.7M
CRE Nonowner Occupied$1,070.1M $1,055.2M $1,137.0M
Total Loans, Gross$3,800.4M $4,020.1M $4,145.8M

Deposits Mix

Deposits ($USD)Q2 2024Q1 2025Q2 2025
Noninterest Bearing$705.2M $791.5M $787.9M
Interest Bearing Transaction$752.6M $840.4M $791.7M
Savings & Money Market$944.0M $1,372.2M $1,441.7M
Time Deposits$373.7M $326.8M $344.9M
Brokered Deposits$1,032.3M $831.5M $870.6M
Total Deposits$3,807.7M $4,162.5M $4,236.7M

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest MarginQ3/Q4 2025Modest expansion in 2025; accretion 1–2 bps/quarter Slight Q3 expansion with ~7 bps headwind from 7.625% sub-debt; lower accretion; more expansion in Q4 Refined (timing/headwinds)
Loan Growth2H 2025Full-year mid-to-high single-digit 2025 Mid-to-high single-digit in 2H25; align with core deposit growth; L/D target 95–105% Maintained (period focus)
Noninterest Expense GrowthFY 2025High-teens (ex-merger) to support larger base; duplicate costs until conversion High-teens (ex-merger); investments in people/tech; conversion in 3Q25 Maintained
Capital / Share RepurchaseOngoingCET1 >9% target; $15.3M authorization (Q4) CET1 ~9.03%; $13.1M remaining; program extended to Aug 26, 2026 Extended horizon
Preferred DividendQ3 2025Regular quarterly on Series A $36.72 per share ($0.3672 per depositary share) payable Sep 2, 2025 Maintained cadence

Earnings Call Themes & Trends

TopicQ4 2024 (Q-2)Q1 2025 (Q-1)Q2 2025 (Current)Trend
AI/Technology initiativesNew online banking plan; tech investments broadened Online banking rollout targeted; tech investments continuing Online banking rollout in 3Q25; optimizing CRM/nCino; new AI tools for efficiency Accelerating execution
Tariffs/MacroImpact monitoring; cautious outlook “New wave of economic uncertainty…tariffs” noted; client outreach “No material impact from tariffs so far” Improving sentiment
Market M&A disruptionFMCB closed; disruption as tailwind Expect continued disruption benefits Old National–Bremer: attracting talent/clients; tailwind cited Increasing opportunity
Swap fees/product$521K in 4Q $42K; building capability $938K; broader banker adoption Growing contribution
Affordable housing verticalNoted as strategic growth area ~13% y/y growth; national expansion $581M portfolio; 15% y/y; 24% outside MN Expanding
Credit/OfficeOne CBD office loan sold; cleanup charge-off One CBD office loan to nonaccrual; specific reserve Specific reserve maintained; modest watchlist/substandard increase Stable with isolated issues

Management Commentary

  • CEO: “Strong revenue growth during the quarter was driven by additional net interest margin expansion, a record level of fee income, and robust loan growth, while core expenses remained well-controlled.” (Second-quarter release) .
  • CFO: “We could see net interest margin up slightly in the third quarter, with more expansion resuming in the fourth quarter… the $80 million of subordinated debt… create a 7 basis point net drag on margin in the third quarter.” (Call) .
  • Chief Banking Officer: “Deposit growth… typically seasonally low [Q2]… we have seen a nice extended period of relatively linear growth… loan pipeline remains near highest level since 2022.” (Call) .
  • Chief Credit Officer: “Our overall credit profile remains very strong… Non-performing assets declined slightly to just 0.19%… another quarter of no net charge-offs.” (Call) .

Q&A Highlights

  • Margin trajectory: June standalone NIM was ~2.65%; Q3 slight expansion expected, with 7 bps drag from sub-debt; accretion benefit fading .
  • Securities sale: $58.5M of FMCB-acquired securities sold (primarily Treasuries/MBS) yielding “low fours,” redeployed into loans in “mid to upper 6s” — accretive .
  • Swap fees: Lumpy but increasingly recurring; broader banker adoption; used to win quality business and defensively add variable-rate exposure .
  • Funding costs: Continued relationship-by-relationship repricing; active use of callable brokered CDs to lower rates; money markets priced off Fed funds .
  • M&A: Ongoing conversations; focus on organic growth; FMCB systems conversion on track for 3Q25 .

Estimates Context

  • Q2 2025 EPS beat: Actual diluted EPS $0.38 vs S&P Global consensus $0.343; adjusted EPS $0.37 also above consensus. Drivers: NIM expansion, swap fees, securities gain, FHLB prepayment income, and controlled expenses . EPS consensus from S&P Global*.
  • Q2 2025 revenue beat: Actual revenue ~$34.1M vs consensus $32.2M. Company net operating revenue reached $35.3M; non-core items (securities gain and FHLB prepayment) lifted reported noninterest income . Revenue consensus from S&P Global*.
  • Low estimate count (EPS: 3; Revenue: 2) suggests limited analyst coverage; updates should reflect sustained margin expansion and loan growth momentum into 2H25*. Values from S&P Global*.

Key Takeaways for Investors

  • Earnings quality improved: rising NIM, expanding net interest income, and record fee income with swap product adoption signal durable revenue drivers into 2H25 .
  • Balance sheet growth is disciplined: robust loans and deposits growth while maintaining L/D ~98% within target range; CET1 ~9.03% and TBVPS compounding .
  • Asset quality remains a differentiator: 0.00% net charge-offs and NPAs at 0.19% provide resilience amid modest credit migration; specific office risks are contained and actively managed .
  • Near-term NIM catalyst tempered: expect slight Q3 expansion with a manageable 7 bps drag from sub-debt refinancing; accretion tailwind fades, but Q4 expansion resumes if rates ease and loan repricing continues .
  • Fee income lever: swaps have become a meaningful contributor (and competitive tool), supporting margin defensiveness and revenue diversification; watch for ongoing variability but positive trajectory .
  • Strategy and execution: online banking upgrade and FMCB systems conversion in 3Q25 should enhance client experience and efficiency; Twin Cities M&A disruption presents talent/client acquisition tailwinds .
  • Trading implications: upside bias on continued beats if margin expansion and loan pipelines persist; monitor Q3 NIM print (sub-debt drag magnitude), fee income cadence (swaps), and credit migration (watch/substandard) as near-term stock catalysts .

* Values retrieved from S&P Global.