Bridgewater Breaks Through: NIM Hits 3% and ROA Tops 1% Amid Strategic Hires
Twin Cities lender capitalizes on M&A disruption to reach profitability milestones while managing a modest uptick in non-performers.
BWB · Earnings Call · 2026-07-22
Bridgewater Bancshares (BWB) delivered a standout second quarter in 2026, crossing two key profitability thresholds: a net interest margin of 3.07% — ahead of its year-end target — and a return on average assets above 1% for the first time since early 2023. The results were powered by continued net interest income growth, up 21% annualized, and a disciplined approach to balance sheet management. The Twin Cities lender is also capitalizing on M&A-driven market disruption to add talent and expand its affordable housing franchise, though it remains cautious on loan pricing competition.
Reaching the NIM Target
The margin story was the centerpiece of the quarter. Management had set a 3% NIM goal for the end of 2026, and it was achieved two quarters early. CFO Joe Chybowski said: “We are very pleased with the margin expansion we have seen so far in 2026. You'll remember that we entered 2026 with a 2.75% margin in the fourth quarter of 2025 and a goal to achieve a 3% margin by the end of the year.” — Joe Chybowski, President and Chief Financial Officer · 2026-07-22 Loan repricing remains the primary driver, with $629 million of fixed-rate loans maturing over the next year at a weighted average yield of 5.62%, and new originations in the "low sixes." Deposit costs have stabilized, so the focus is on asset yields. The earlier decision to sell securities and redeploy proceeds into higher-yielding loans provided a small but notable tailwind, as Chybowski explained in the prior quarter: “I think that the securities sale certainly contributed to the margin outperformance, but it was a small amount. I mean it's 2 basis points in the quarter.” — Joseph Chybowski, President and Chief Financial Officer · 2026-04-22 More importantly, the loan production and repricing are expected to continue driving NIM higher, albeit at a slower pace.Strategic Hires and Market Disruption
Bridgewater added 15 key hires year-to-date from competitor banks that have been acquired, a direct outcome of the market disruption in the Twin Cities. CEO Jerry Baack highlighted the achievement:The company front-loaded expenses to onboard this talent, but expects to hold expenses flat from second-quarter levels through the remainder of the year. As Chybowski noted: “Given the higher pace of expense growth in the first half of the year, we expect to be able to hold expenses relatively flat from second quarter levels over the remainder of 2026.” — Joe Chybowski, President and Chief Financial Officer · 2026-07-22 This investment is intended to support future scaling and client acquisition.We surpassed a 1% ROA for the first time since early 2023, which was largely driven by continued net interest margin expansion and net interest income growth.
Disciplined Growth and Asset Quality
Loan growth was moderate at 5.4% annualized as the bank prioritizes profitable relationships over volume. Chief Banking Officer Nick Place addressed the competitive environment: “Loan competition remains elevated as credit unions and some of the larger regionals are being more aggressive on pricing. To us, being disciplined means knowing we don't need to grow at any cost.” — Nick Place, Chief Banking Officer · 2026-07-22 Management now expects mid-to-high single-digit loan growth in the back half, contingent on core deposit trends and payoff levels. Asset quality remains sound, with a modest uptick in non-performing assets to 40 basis points, driven by a single mixed-use property. Chief Credit Officer Katie Morrell commented:The bank also increased the specific reserve on its central business district office loan to $4 million, signaling progress toward a disposition.The overall credit profile of our portfolio continues to be strong. Non-performing assets did move modestly higher in the quarter to 40 basis points.