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Bridgewater Bancshares Inc (BWB)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered solid core performance: net interest margin expanded 8 bps to 2.32%, net interest income rose 5.3% q/q to $26.97M, and nonperforming assets fell sharply to 0.01% of assets following resolution of a CBD office exposure .
  • EPS diluted was $0.26 (adjusted EPS $0.27), down modestly vs Q3 ($0.27) as merger-related costs and higher noninterest expense offset margin gains; efficiency ratio improved to 56.8% from 58.0% .
  • Balance sheet growth accelerated: deposits +9.1% q/q (core deposits strong; brokered deposits -8.3%), loans +5.0% q/q (ex-FMCB +7.1% annualized); loan-to-deposit ratio decreased to 94.7% .
  • Management set 2025 expectations for mid- to high single-digit loan growth, modest NIM expansion (including 1–2 bps/quarter of purchase accounting accretion), high-teens opex growth ex-merger, and L/D ratio target of 95–105%, positioning for “more normalized levels of profitable growth” .

What Went Well and What Went Wrong

What Went Well

  • Core deposit momentum and funding mix: core deposits rose $428.2M q/q (63.6% annualized) with brokered deposits down $75.2M; cost of total deposits fell 18 bps to 3.40% on Fed cuts and pricing actions .
  • NIM and NII expansion: NIM up 8 bps to 2.32% (2.30% excluding FMCB stub), net interest income +$1.37M q/q to $26.97M; December average NIM reached 2.36% per management .
  • Asset quality normalization: NPAs fell to 0.01% of assets from 0.19% in Q3 after sale/cleanup of the CBD office loan; net charge-offs annualized declined to 0.03% from 0.10% .

Management quote: “We were pleased to finish 2024 with a strong quarter… robust balance sheet growth, a return to net interest margin expansion and superb asset quality” — CEO Jerry Baack .

What Went Wrong

  • EPS dilution from merger-related and higher opex: diluted EPS fell to $0.26 (from $0.27), noninterest expense increased $1.05M q/q to $16.81M, including $488K of merger costs and ~$199K FMCB stub expense .
  • CET1 ratio decline on acquisition: CET1 decreased to 9.08% from 9.79% in Q3 on FMCB closing, though still above the 9% target per CFO .
  • Watch/special mention loans increased to $46.6M (from $32.0M), partly due to one multifamily loan and acquired credits; spreads remain tight with competitive pressure noted .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Net Interest Income ($MM)$25.31 $24.996 $25.599 $26.967
Noninterest Income ($MM)$1.409 $1.763 $1.522 $2.533
Net Operating Revenue ($MM)$26.750 $26.439 $27.149 $29.500
Diluted EPS ($)$0.28 $0.26 $0.27 $0.26
Adjusted Diluted EPS ($)$0.28 $0.26 $0.28 $0.27
Net Interest Margin % (FTE)2.27% 2.24% 2.24% 2.32%
Core NIM % (FTE)2.21% 2.17% 2.16% 2.25%
Cost of Total Deposits %3.19% 3.46% 3.58% 3.40%
Efficiency Ratio %58.8% 58.7% 58.0% 56.8%

Segment breakdown (Loans, $000):

CategorySep 30, 2024Dec 31, 2024
Commercial$493,403 $497,662
Leases—$44,291
Construction & Land Dev.$118,596 $97,255
1–4 Family Construction$45,822 $41,961
1–4 Family Mortgage$421,179 $474,383
Multifamily$1,379,814 $1,425,610
CRE Owner-Occupied$182,239 $191,248
CRE Nonowner-Occupied$1,032,142 $1,083,108
Consumer & Other$12,395 $12,996
Total Loans, Gross$3,685,590 $3,868,514

Deposits mix ($000):

CategorySep 30, 2024Dec 31, 2024
Noninterest-Bearing$713,309 $800,763
Interest-Bearing Transaction$805,756 $862,242
Savings & Money Market$980,345 $1,259,503
Time Deposits$347,080 $338,506
Brokered Deposits$900,952 $825,753
Total Deposits$3,747,442 $4,086,767

KPIs

KPIQ4 2023Q3 2024Q4 2024
Loan-to-Deposit Ratio %100.4% 98.3% 94.7%
Core Deposits / Total Deposits %68.7% 71.5% 76.0%
Uninsured Deposits / Total Deposits %24.3% 25.0% 27.7%
Nonperforming Assets / Assets %0.02% 0.19% 0.01%
Net Loan Charge-offs / Avg Loans (annualized) %0.01% 0.10% 0.03%
CET1 Risk-based Ratio %9.16% 9.79% 9.08%
TCE / TA %7.73% 8.17% 7.36%
Tangible Book Value / Share ($)$12.84 $13.96 $13.49
Efficiency Ratio %58.8% 58.0% 56.8%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Loan Growth (YoY)FY 2025No formal numeric guide in Q3 PR; management defensive growth posture Mid- to high single-digit; pipeline near 2-year highs; more offensive posture supported by liquidity Raised clarity/introduced
Net Interest MarginFY 2025Balance sheet “well positioned for rate cuts”; no numeric guide Modest expansion expected; includes 1–2 bps/quarter purchase accounting accretion (~$3M FY) Introduced
Purchase Accounting AccretionFY 2025N/A+1–2 bps per quarter to NIM; ~$3M FY accretion Introduced
Noninterest Expense Growth (ex-merger)FY 2025N/AHigh-teens growth to support acquisition assets and higher loan growth; investments in people/technology Introduced
Loan-to-Deposit Ratio TargetFY 2025L/D ~95–105% implied through optimization Maintain 95–105% Maintained
Share RepurchasesFY 2025$15.3M authorization remaining; paused in Q3 $15.3M remaining; evaluate opportunistically vs. growth/capital Maintained optionality

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
Deposit strategy & fundingQ2: core deposit growth YTD; funding cost pressure; balanced L/D ~99.8% • Q3: strong core deposit growth; brokered down; L/D 98.3% Core deposits +$211M ex-FMCB; brokered -$75M; cost of deposits 3.40% (down 18 bps) Improving mix; lower funding costs
Margin outlook & rate sensitivityQ2/Q3: NIM steady at 2.24%; positioned for cuts Modest NIM expansion expected; December NIM 2.36%; 1–2 bps/quarter accretion Expanding modestly
Loan demand & originationQ2: moderated; repricing improving • Q3: payoffs elevated; demand improving Loan balances +7.1% annualized ex-FMCB; new originations highest since summer 2022; pipeline near 2-year highs Accelerating
Asset quality & office CRE exposureQ2/Q3: NPAs low; one CBD office moved to nonaccrual in Q3 CBD office property sold; cleanup charge-off ~$300K; NPAs 0.01% of assets; office exposure limited (5% loans; 3 CBD loans) Normalizing risk
Technology & operations2024: CRM rollout; online banking upgrades; efficiency improvements Continue tech investments; roll out new online banking; leverage AI tools to enhance client experience Scaling capabilities
M&A integrationAnnounced/approved FMCB; close expected Q4 Closed FMCB in 107 days; systems conversion expected Q3 2025; cost saves ~30% in 2025 Executing per plan

Management Commentary

  • CEO: “Core deposit growth was very strong and loan balances rebounded nicely… margin expansion during the quarter as our balance sheet was well-positioned for recent Fed rate cuts” .
  • CFO: “Deposit costs declining 18 bps to 340… expect modest net interest margin expansion in 2025; accretion will add 1 to 2 bps per quarter” .
  • Chief Banking Officer: “Loan demand… translated into a nice uptick in new originations… pipeline remains near 2-year highs… target mid- to high single-digit loan growth for 2025” .
  • Chief Credit Officer: “We remain bullish on multifamily… office exposure limited; the CBD office loan was sold… total loss ~15% of principal, reasonable given today’s environment” .

Q&A Highlights

  • Margin cadence: December NIM 2.36%; management expects Q1 2025 NIM similar traction to Q4; modest expansion includes purchase accounting accretion .
  • Deposit repricing: Short-term CDs in high-3s; money market at Fed funds minus; optionality to call brokered CDs (called ~$200M >5% in 2024) to lower funding costs .
  • NII growth: With one Fed cut assumed, management expects low double-digit net interest income growth aligned to asset growth via margin and volumes .
  • Loan payoffs: Expect run-rate similar to Q4; strong originations should offset elevated payoffs .
  • Opex trajectory: High-teens opex growth in 2025 ex-merger reflects legacy growth plus integration of FMCB (assets ~5% vs expenses ~10%) with ~30% cost saves targeted .

Estimates Context

  • Wall Street consensus via S&P Global was unavailable due to system limit at time of retrieval; therefore no EPS or revenue beat/miss comparison is provided. Values retrieved from S&P Global were unavailable at this time.

Key Takeaways for Investors

  • Funding costs inflected lower; deposit cost down 18 bps q/q with brokered balances declining, supporting continued margin expansion into 2025 even if rate cuts are limited .
  • Core growth returning: loans +5.0% q/q (+7.1% annualized ex-FMCB) and deposits +9.1% q/q, with L/D at 94.7% creating capacity for “offensive-minded” growth in 2025 .
  • Asset quality de-risked: CBD office resolution drove NPAs to 0.01% of assets; watch/special mention increase manageable, substandard down 31% q/q .
  • 2025 setup: mid- to high single-digit loan growth, modest NIM expansion, and low double-digit NII growth targeted; purchase accounting accretion is a tailwind (1–2 bps/quarter) .
  • Capital remains adequate post-deal: CET1 at 9.08% (above 9% target) with $15.3M buyback capacity, though priority is growth/integration near term .
  • Tactical trading: Near-term catalysts include Q1 margin trajectory (management expects similar to Q4) and continued deposit repricing; monitoring payoffs vs originations and systems conversion timing (Q3) will frame opex normalization .
  • Medium-term thesis: Twin Cities multifamily expertise, expanded branch footprint, and technology investments (CRM, online banking, AI tools) underpin share gains and efficiency improvement, while disciplined credit mitigates CRE office headwinds .

Additional Documents Reviewed

  • Earnings press release (Q4 2024): Bridgewater Bancshares, Inc. Announces Fourth Quarter 2024 Financial Results
  • Form 8‑K Item 2.02 with full financial tables and investor presentation (Q4 2024) -
  • Earnings call transcript (Q4 2024) -
  • Press releases related to Q4: FMCB acquisition completion (Dec 16, 2024) ; earnings call scheduling (Jan 7, 2025)
  • Prior quarter releases for trend analysis: Q3 2024 and Q2 2024 - -