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Bridgewater Bancshares Inc

BWBBP
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Business Summary

Bridgewater Bancshares, Inc. (the "Company") operates as a financial holding company primarily within the Minneapolis-St. Paul-Bloomington, MN-WI Metropolitan Statistical Area ("Twin Cities MSA") . The Company and its wholly-owned subsidiary, Bridgewater Bank (the "Bank"), were established in 2005 . The Twin Cities MSA is characterized by attractive demographics, including strong household incomes, dense populations, a resilient employee base, and a diverse business landscape . As of June 30, 2025, the Twin Cities MSA had total deposits of $232.6 billion , ranking as the 15th largest MSA in the United States and third largest in the Midwest by total deposits . The Company's business model focuses on providing responsive support and simple solutions to businesses, entrepreneurs, and successful individuals, with a primary emphasis on organic growth, particularly in commercial real estate (CRE) lending .

The Company operates in a competitive market, competing with larger national and regional banks. As of June 30, 2025, two large national banking chains, Wells Fargo & Co and U.S. Bancorp, collectively controlled 58.96% of the deposit market share in the Twin Cities MSA . In contrast, Bridgewater Bancshares, Inc. held a deposit market share of 1.84%, ranking ninth overall in the Twin Cities MSA and third among banks headquartered in Minnesota . The Company believes it has a "local banking advantage" due to market disruption from acquisitions of local institutions by larger regional banks, which has created opportunities to attract talent and clients .

The core business model revolves around generating income primarily from interest and fees on loans, interest and dividends from investment securities, and noninterest income such as service charges, letter of credit fees, and swap fees . The principal expenses include interest paid on deposits and borrowings, employee compensation, and other overhead . The Company emphasizes client service, responsive credit processes, and efficiency . Funding for loans and investments is sourced from transaction, savings, time, and brokered deposits, as well as short-term and long-term borrowings .

The Company's lending activities are primarily focused on commercial clients, including loans secured by nonfarm, nonresidential properties, multifamily residential properties, nonowner occupied single-family residential properties, construction loans, land development loans, and commercial and industrial loans . Multifamily financing is a particular expertise, historically representing a large portion of the loan portfolio and exhibiting lower historical loss rates . The Company has also expanded its focus on affordable housing lending, both in the Twin Cities and nationally, leveraging the complex nature of these transactions as a competitive advantage . As of December 31, 2025, total gross loans were $4.31 billion , with real estate mortgage lending constituting 79.7% of the portfolio . Investor CRE loans, comprising multifamily, CRE nonowner occupied, construction and land development, and 1-4 family construction loans, totaled $3.01 billion, representing 69.9% of the total gross loan portfolio and 473.1% of the Bank's total risk-based capital .

The Company offers a suite of deposit products for commercial clients, including remote deposit and cash management, alongside traditional retail deposit products through its branch network and digital channels . Deposits are the primary funding source, with strong core deposit growth in 2025 allowing for reduced reliance on brokered and wholesale funding . However, brokered deposits remain a strategic component of the funding strategy and interest rate risk management . As of December 31, 2025, total deposits were $4.32 billion , with core deposits at $3.35 billion, representing 77.6% of total deposits . Brokered deposits totaled $810.5 million, or 18.8% of total deposits .

For the fiscal year ended December 31, 2025, the Company reported net income of $46.088 million , an increase from $32.825 million in 2024 . Diluted earnings per common share were $1.49 , up from $1.03 in 2024 . Net interest income increased to $132.438 million from $102.193 million in 2024 . The net interest margin (on a fully tax-equivalent basis) was 2.63% , a 37 basis point increase from 2.26% in 2024 . Total assets grew to $5.407 billion from $5.066 billion in 2024 . Total gross loans increased by $441.0 million, or 11.4%, to $4.31 billion . Total deposits increased by $233.6 million, or 5.7%, to $4.32 billion . Total shareholders' equity was $517.095 million , up from $457.935 million in 2024 . The allowance for credit losses on loans and leases was $56.443 million , representing 1.31% of total loans . Nonperforming loans significantly increased to $22.034 million from $301,000 in 2024 , representing 0.51% of total loans .

The Company's net income increased by 40.4% year-over-year, and diluted EPS increased by 44.9% . Net interest income saw a substantial increase of $30.2 million , driven by higher cash and securities balances, loan portfolio growth, and higher yields, partially offset by increased deposit balances . The net interest margin expanded by 37 basis points . Noninterest income increased by $3.5 million, or 48.1%, to $10.9 million , primarily due to higher swap fees, investment advisory fees, and customer service fees . Noninterest expense rose by $14.0 million, or 22.1%, to $77.3 million , mainly due to increases in salaries and employee benefits, professional and consulting fees, data processing, marketing, intangible asset amortization, and merger-related expenses . The provision for credit losses on loans and leases increased to $5.7 million from $2.9 million in 2024 , attributed to loan portfolio growth and increased historical loss rates .

During 2025, the Company completed several operational developments. On June 24, 2025, it issued $80.0 million in 7.625% Fixed-to-Floating Rate Subordinated Notes due 2035, using the net proceeds to redeem $50 million of outstanding 5.25% Fixed-to-Floating Rate Subordinated Notes due 2030 and for general corporate purposes . On December 29, 2025, the Country Village branch location was closed due to its proximity to other branches . In February 2026, a new branch was opened in Lake Elmo, Minnesota, to expand the Company's presence in the eastern Twin Cities market . The Company also announced leadership transitions, including the retirement of Mary Jayne Crocker, Chief Strategy Officer, and Jeff Shellberg, former Chief Credit Officer, effective in 2026, with Katie Morrell, Jessica Stejskal, and Laura Espeseth joining the Strategic Leadership Team in 2025 .

Business Outlook

The Company intends to continue its organic growth strategy, leveraging its commercial banking expertise, experienced banking team, efficient business model, and strong brand to capitalize on opportunities within its market area . A key aspect of this strategy is the expansion of its affordable housing initiative to a national level . The Company aims to increase core deposits over time to support loan growth and build market share by expanding existing client relationships and developing new deposit-focused clients, including through marketing and networking efforts . On the lending side, the Company expects continued organic growth in commercial loans, driven by favorable market demographics in the Twin Cities MSA and opportunities arising from market disruption due to local bank acquisitions by out-of-state entities .

Management anticipates that the pace of loan growth, which returned to more normalized levels in 2025 due to an improved interest rate environment and core deposit growth momentum, will continue . The Company also plans to continue to expand its physical footprint, as evidenced by the opening of a new branch in Lake Elmo, Minnesota, in February 2026, to enhance its presence in the eastern Twin Cities market .

The Company may also consider additional opportunistic acquisitions that align with its strategic priorities and are complementary to its existing business, similar to the acquisition of First Minnetonka City Bank in December 2024 . Management believes there will be further bank consolidation in the Twin Cities MSA and surrounding markets, positioning the Company as a preferred partner for smaller institutions seeking to sell . The Company intends to maintain a disciplined approach to pricing, new business lines, and new markets in any future acquisition pursuits .

The Company's efficiency ratio, a non-GAAP financial measure, was 53.5% for the year ended December 31, 2025, and has consistently remained below the industry median due in part to its "branch-light" model . The Company expects to offset a potentially higher average cost of funds for local deposits, compared to competitor banks, with a lower level of operating expense .

The Company's capital allocation strategy includes maintaining strong capital levels while enhancing shareholder value, with the use of its stock repurchase program based on factors such as valuation and capital levels . As of December 31, 2025, $13.1 million remained authorized for share repurchases under the 2022 Stock Repurchase Program, which was extended to August 26, 2026 . The Company has not historically declared or paid dividends on its common stock and does not intend to do so in the foreseeable future, anticipating that future earnings will be retained to support operations and finance business growth and development .

Risk Factors

The Company faces significant credit risks, particularly due to its concentration in commercial real estate (CRE) loans, which totaled $3.01 billion and represented 69.9% of the total gross loan portfolio and 473.1% of the Bank's total risk-based capital as of December 31, 2025 . This concentration makes the Company highly susceptible to fluctuations in real estate values and the overall health of the real estate market, with adverse developments potentially increasing credit risk and requiring higher capital ratios . The geographic concentration of operations in the Twin Cities MSA means a local economic downturn could disproportionately affect growth and profitability . The Company is also exposed to liquidity and funding risks, including dependence on non-core funding sources like brokered deposits, which accounted for 18.8% of total deposits at December 31, 2025 , and a high concentration of large depositor relationships, with the 10 largest accounting for approximately 16.2% of total deposits at December 31, 2025 . Approximately 30% of total deposits were uninsured at December 31, 2025 , posing a risk of significant withdrawals during financial distress. Operational risks include the ability to effectively implement growth strategies, manage costs, and attract and retain key personnel, as well as the increasing threat of fraudulent activity, information security breaches, and cybersecurity incidents, including those employing artificial intelligence . The Company's reliance on third-party systems for critical operations also presents risks of system failures or data breaches . Legal, accounting, and compliance risks stem from extensive regulation, including stringent capital requirements, consumer protection laws, and anti-money laundering statutes, with noncompliance potentially leading to significant fines or sanctions . Market and interest rate risks are material, as fluctuations in interest rates can adversely affect net interest income and the fair value of the securities portfolio, which had $7.3 million in unrealized losses, net of tax, as of December 31, 2025 .

Management Priorities

Management's message to shareholders emphasizes a commitment to consistent, robust growth, driven by proven strategies and leveraging competitive strengths. The Company intends to continue its focus on organic growth, particularly in commercial real estate lending and the expanding national affordable housing strategy . Management also highlights the importance of increasing core deposits to support loan growth and market share expansion . Opportunistic acquisitions that align with strategic priorities will continue to be evaluated . The Company's strategic leadership team is noted for its experience and ability to execute the growth strategy, with recent leadership transitions aimed at long-term growth and stability . Management is committed to maintaining strong capital levels and enhancing shareholder value, as evidenced by the ongoing stock repurchase program, which had $13.1 million remaining as of December 31, 2025, and was extended to August 26, 2026 . The Company does not intend to pay cash dividends on its common stock in the foreseeable future, preferring to retain earnings for operating capital and business development .

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 1, Business — Company Overview and History
  2. [2] Item 1, Business — Company Overview and History
  3. [3] Item 1, Business — Company Overview and History
  4. [4] Item 1, Business — Market Area and Competition
  5. [5] Item 1, Business — Company Overview and History
  6. [6] Item 1, Business — Market Area and Competition
  7. [7] Item 1, Business — Market Area and Competition
  8. [8] Item 1, Business — Market Area and Competition
  9. [9] Item 1, Business — Company Overview and History
  10. [10] Item 1, Business — Market Area and Competition
  11. [11] Item 1, Business — Market Area and Competition
  12. [12] Item 1, Business — Market Area and Competition
  13. [13] Item 1, Business — Company Overview and History
  14. [14] Item 1, Business — Company Overview and History
  15. [15] Item 1, Business — Products and Services
  16. [16] Item 1, Business — Company Overview and History
  17. [17] Item 1, Business — Products and Services
  18. [18] Item 1, Business — Competitive Strengths
  19. [19] Item 1, Business — Products and Services
  20. [20] Item 1, Business — Company Overview and History
  21. [21] Item 7, MD&A — Loan Portfolio
  22. [22] Item 1, Business — Supervision and Regulation — Concentrations in Commercial Real Estate
  23. [23] Item 1, Business — Products and Services
  24. [24] Item 1, Business — Products and Services
  25. [25] Item 1, Business — Products and Services
  26. [26] Item 1, Business — Company Overview and History
  27. [27] Item 7, MD&A — Deposits
  28. [28] Item 7, MD&A — Deposits
  29. [29] Item 7, MD&A — Net Income
  30. [30] Item 7, MD&A — Net Income
  31. [31] Item 7, MD&A — Net Income
  32. [32] Item 7, MD&A — Net Income
  33. [33] Item 7, MD&A — Net Interest Income
  34. [34] Item 7, MD&A — Net Interest Income
  35. [35] Item 7, MD&A — Net Interest Income
  36. [36] Item 7, MD&A — Net Interest Income
  37. [37] Item 1, Business — Company Overview and History
  38. [38] Item 7, MD&A — Financial Condition Overview
  39. [39] Item 7, MD&A — Loan Portfolio
  40. [40] Item 7, MD&A — Deposits
  41. [41] Item 1, Business — Company Overview and History
  42. [42] Item 7, MD&A — Capital
  43. [43] Item 7, MD&A — Allowance for Credit Losses
  44. [44] Item 7, MD&A — Allowance for Credit Losses
  45. [45] Item 7, MD&A — Nonperforming Assets
  46. [46] Item 7, MD&A — Nonperforming Assets
  47. [47] Item 7, MD&A — Nonperforming Assets
  48. [48] Item 7, MD&A — Selected Performance Ratios
  49. [49] Item 7, MD&A — Growth Ratios
  50. [50] Item 7, MD&A — Net Interest Income
  51. [51] Item 7, MD&A — Net Interest Income
  52. [52] Item 7, MD&A — Net Interest Income
  53. [53] Item 7, MD&A — Noninterest Income
  54. [54] Item 7, MD&A — Noninterest Income
  55. [55] Item 7, MD&A — Noninterest Expense
  56. [56] Item 7, MD&A — Noninterest Expense
  57. [57] Item 7, MD&A — Provision for Credit Losses
  58. [58] Item 7, MD&A — Provision for Credit Losses
  59. [59] Item 7, MD&A — Provision for Credit Losses
  60. [60] Item 7, MD&A — Recent Developments
  61. [61] Item 7, MD&A — Recent Developments
  62. [62] Item 7, MD&A — Recent Developments
  63. [63] Item 1, Business — Competitive Strengths
  64. [64] Item 1, Business — Strategies for Growth
  65. [65] Item 1, Business — Strategies for Growth
  66. [66] Item 1, Business — Strategies for Growth
  67. [67] Item 1, Business — Strategies for Growth
  68. [68] Item 1, Business — Strategies for Growth
  69. [69] Item 7, MD&A — Recent Developments
  70. [70] Item 1, Business — Strategies for Growth
  71. [71] Item 1, Business — Strategies for Growth
  72. [72] Item 1, Business — Strategies for Growth
  73. [73] Item 7, MD&A — Noninterest Expense
  74. [74] Item 7, MD&A — Deposits
  75. [75] Item 7, MD&A — Capital
  76. [76] Item 7, MD&A — Capital
  77. [77] Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Dividend Policy
  78. [78] Item 1A, Risk Factors — Credit Risks
  79. [79] Item 1A, Risk Factors — Credit Risks
  80. [80] Item 1A, Risk Factors — Credit Risks
  81. [81] Item 1A, Risk Factors — Liquidity and Funding Risks
  82. [82] Item 1A, Risk Factors — Liquidity and Funding Risks
  83. [83] Item 1A, Risk Factors — Liquidity and Funding Risks
  84. [84] Item 1A, Risk Factors — Operational, Strategic and Reputational Risks
  85. [85] Item 1A, Risk Factors — Operational, Strategic and Reputational Risks
  86. [86] Item 1A, Risk Factors — Legal, Accounting and Compliance Risks
  87. [87] Item 1A, Risk Factors — Market and Interest Rate Risks
  88. [88] Item 1, Business — Strategies for Growth
  89. [89] Item 1, Business — Strategies for Growth
  90. [90] Item 1, Business — Strategies for Growth
  91. [91] Item 1, Business — Competitive Strengths
  92. [92] Item 7, MD&A — Capital
  93. [93] Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Dividend Policy

Analysis on 5/20/2026