Bridgewater Bancshares, Inc. ($BWB)

Good morning, and welcome to the Bridgewater Bancshares' 2026 First Quarter Earnings Call. My name is Danielle, and I will be your conference operator today. [Operator Instructions] Please note that today's call is being recorded. At this time, I would like to introduce Justin Horstman, Vice President of Investor Relations, to begin the conference call. Please go ahead.

Thank you, Danielle, and good morning, everyone. Joining me on today's call are Jerry Baack, Chairman and Chief Executive Officer; Joe Chybowski, President and Chief Financial Officer; Nick Place, Chief Banking Officer; and Katie Morrell, Chief Credit Officer. In just a few moments, we will provide an overview of our 2026 first quarter financial results. We will be referencing a slide presentation that is available on the Investor Relations section of Bridgewater's website, investors.bridgewaterbankmn.com. Following our opening remarks, we will open the call for questions. During today's presentation, we may make projections or other forward regarding future events or the future financial performance of the company. We caution that such statements are predictions and that actual results may differ materially. Please see the forward-looking statement disclosure in the slide presentation and our 2026 first quarter earnings release for more information about risks and uncertainties, which may affect us. The information we will provide today is as of and for the quarter ended March 31, 2026, and we undertake no duty to update the information. We may also disclose non-GAAP financial measures during this call. We believe certain non-GAAP financial measures, in addition to the related GAAP measures provide meaningful information to investors to help them understand the company's operating performance and trends and to facilitate comparisons with the performance of our peers. We caution that these disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP. Please see our slide presentation and 2026 first quarter earnings release for reconciliations of non-GAAP disclosures to the comparable GAAP measures. I would now like to turn the call over to Bridgewater's Chairman and CEO, Jerry Baack.

Thank you, Justin, and thank you for joining us this morning. Bridgewater is off to a strong start in 2026 with several positive developments during the quarter, positioning us well for the rest of the year. First and foremost, I would like to point out our net interest margin expansion. While we mentioned last quarter that we expected to reach a 3% margin by the end of 2026, we nearly got there in the first quarter as margin expanded to 2.99%. Deposit costs declined and loans repriced higher, helping us get there quicker than anticipated. We expect to see slow additional margin expansion over the coming quarters. Because of the strong net interest margin, we were able to continue growing net interest income. This happened even while our balance sheet shrunk during the quarter, due to some strategic sales of securities. These securities sales were part of several opportunistic actions taken in the first quarter to enhance our balance sheet efficiency, resulting in both a substantial gain and positioning us for improved profitability moving forward. I want to be clear that this was not the standard balance sheet repositioning many other banks have done recently that involved selling securities at a large loss to increase future margin but rather a calculated tactic, Joe and our treasury team recognized as interest rates moved in our favor. In response to this shift, they executed on an opportunity to improve forward profitability while taking an immediate gain. Joe will provide more details on this in a minute. I'm pleased to report we continued to take market share in the first quarter as the loan portfolio grew 5.5% annualized with much of the growth continuing to come from our commitment to our affordable housing vertical. Core deposit momentum also continued as balances increased 3.2% annualized while the overall deposit mix continued to improve. Asset quality remained positive in the first quarter as net charge-offs and nonperforming assets both declined nicely. We continue to feel good about the overall asset quality of our loan portfolio, resulting from the strong credit culture we pride ourselves on. In addition, we saw a nice uptick in our capital ratios as CET1 increased 36 basis points to 9.53%. Turning to Slide 4. Tangible book value growth continues to be a stable of the Bridgewater story. And that was no different in the first quarter as tangible book value increased 9.9% annualized to $15.93 per share. This is an important differentiator for Bridgewater. We are proud of our ability to create aid and sustain shareholder value through tangible book value growth and how consistent this trajectory has been over the past decade. Before I pass it over to Joe, I also wanted to share that we successfully expanded our footprint to the East. In February, we opened our de novo branch in Lake Elmo, there's a growing area in the Twin Cities, and we are thrilled with the opportunities it presents to Bridgewater Bank. With that, I'll turn it over to Joe.

Thanks, Jerry. Before we take a deeper dive into the first quarter results, I wanted to walk through the balance sheet efficiency actions we took in late January and early February, which are laid out on Slide 5. As Jerry mentioned, this was really a win-win for us as our treasury team recognized how we could take advantage of the volatility in interest rates to not only improve future profitability but also generate substantial near-term revenue. As part of this strategy, we sold a portion of our high-quality securities portfolio, which included the sale of $147 million of treasuries for a net gain of $1.2 million and the sale of $62 million of municipal bonds for a net gain of $6.1 million. By selling these securities that were yielding in the 4% and 5% ranges, we were able to redeploy these dollars into higher-yielding loans going forward. In addition to these security sales, we also prepaid $97.5 million of higher cost FHLB advances that were being used to fund the securities. While this resulted in a prepayment expense of $982,000 it helped to improve our funding mix and reduce our overall cost of funds. At the end of the day, we generated an additional $7.3 million of pretax net income in the first quarter. increased our permanent capital levels and supported future net interest margin expansion by reducing our cost of funds and creating an opportunity to redeploy capital into higher-yielding loans. This is another example of how we are actively and thoughtfully managing our balance sheet to drive shareholder value. Turning to Slide 6. We were able to grow net interest income by 3% quarter-over-quarter despite the average interest-earning assets declining $185 million as a result of the balance sheet actions I just mentioned. This is pretty impressive and was driven by 24 basis points of net interest margin expansion in the first quarter to $2.99. Our expectation had been to get to a 3% net interest margin by the end of '26, but we were very pleased that several factors allowed us to nearly get there in the first quarter. First, we saw the full quarter impact of the fourth quarter rate cuts on both sides of the balance sheet. As total deposit costs declined 18 basis points and loan yields were still able to reprice higher by 3 basis points given the fixed rate nature of the portfolio. Notably, deposit betas during this most recent rate cut cycle have outperformed the betas we saw during the prior cycle, primarily due to a larger portion of our deposit base being directly tied to short-term rates. Second, loan fees continue to increase as payoffs remained elevated. And third, there was a modest margin impact within the quarter from the balance sheet efficiency actions we took which resulted in a decrease in higher cost borrowings and a smaller balance sheet. Given that we were able to pull forward much of our expected net interest margin expansion for the year into the first quarter, we expect the pace of margin expansion to slow meaningfully going forward. However, we still expect to see some mild margin expansion over the coming quarters, even with no additional rate cuts. With net interest margin resetting higher, some margin expansion expected to continue and earning asset growth set to return, we are well positioned to continue driving net interest income moving forward. Slide 7 highlights some of the net interest margin drivers. The cost of total deposits declined by 18 basis points in the first quarter and is now down 40 basis points over the past 2 quarters. The decline in the first quarter reflects the full quarter impact of the rate cuts from the fourth quarter of 2025. Absent any additional rate cuts, we would expect to see deposit costs stabilize going forward. although we will continue to look for additional opportunities to lower the rates of deposit accounts where it makes sense. Our portfolio loan yield increased 3 basis points during the quarter to 5.81%. As we have said in the past, we expect our loan portfolio to continue to reprice higher in the current environment given the larger fixed rate component, which makes up 65% of the portfolio. We have been actively originating more variable rate loans to make the portfolio more rate neutral going forward. Variable rate loans now make up 23% of the loan portfolio, up from 17% a year ago. We would expect this loan repricing to continue to support future margin expansion as our loan portfolio includes $644 million of fixed rate loans scheduled to mature over the next 12 months at a weighted average yield of $573 and another $106 million of adjustable rate loans repricing or maturing at 3.86%. With these lower yields running off the books and new originations in the first quarter going on the books around 6% and we have further repricing upside ahead of us. Turning to Slide 8. We continue to see strong profitability and revenue growth trends as our adjusted return on average assets was just under 1% for the second consecutive quarter. We have also continued to consistently grow total revenue driven by steady net interest income growth. In addition, noninterest income has topped $2 million every quarter since the fourth quarter of 2024. And even excluding securities gains. This is a result of new fee income sources we have added recently, including swap fees and investment advisory fees, both of which we expect to continue to see throughout 2026. Turning to Slide 9. We have a strong track record of well-managed expense growth as evidenced by our consistently better than peer efficiency ratio. Excluding the $982,000 of FHLB prepayment expense expenses still a bit elevated in the first quarter, which is typically the case due to some seasonality. First quarter expenses included our annual merit increases going into effect across the organization early in the quarter. several key strategic hires related to the disruption in the market and the pull forward of some charitable contributions. Occupancy expense also increased due to the opening of our new branch in Lake Elmo. As we've said before, we continue to expect adjusted noninterest expense to track closely with our general pace of asset growth over time. Keep in mind that this won't apply in the first quarter as assets declined due to the security sales. With that, I'll turn it over to Nick.

Thanks, Joe. Turning to Slide 10. You can see our core deposit momentum continued with annualized growth of 3.2% in the first quarter. We are pleased with this level of growth as balances tend to remain seasonally lower earlier in the year. We have also seen an ongoing positive deposit mix shift given the more consistent core deposit growth an overall decline in higher-cost brokered and time deposits, which have declined on a combined basis year-over-year. We continue to be very pleased with our core deposit growth and pipeline overall. This includes traction in our affordable housing vertical as well as opportunities from the ongoing M&A disruption in the Twin Cities. While our deposit growth tends to be a bit slower during the first half of the year, we feel really good about our ability to continue growing core deposits over time as these provide the fuel for our organic loan growth. Turning to Slide 11. Loan balances grew 5.5% annualized in the first quarter. We have seen an increase in competition in recent months, which has caused spreads to tighten a bit, but our pipeline remains strong and is near 3-year highs. As a result, we are in a good position to be selective on the types of deals we want to do and at yields that make sense. Overall, we feel we are right on track to hit our expectations of high single-digit loan growth for the year. Obviously, there will be various factors that impact our pace of growth, including competitive dynamics levels of payoffs and of course, core deposit growth, which is really our governor on how quickly we can grow loans. Turning to Slide 12. You can see that our loan pipeline is continuing to translate into new originations and while loan advances continue to increase as well. The increase in loan advances was driven by new construction projects over the past year that are now funding. We would expect to see new originations and advances remain strong in 2026. Payoff activity also remained elevated, and we expect these to continue given the current interest rate environment. Turning to Slide 13. C&I was the largest loan growth category during the first quarter. This was largely due to activity in real estate-related C&I, including affordable housing. C&I is a strategic growth focus for us and an area in which we continue to invest. This includes adding additional talent with 3 new C&I bankers we have recently brought on board, stemming from the M&A disruption in the market. Overall, we are optimistic about our ability to continue expanding both talent and clients in this area. We continue to see meaningful opportunities for growth in affordable housing as balances in this vertical increased $57 million or 35% annualized during the first quarter. This growth was spread across both C&I and multifamily. With an ongoing focus on growing affordable housing and C&I as well as our strong expertise in multifamily and CRE, we feel good about the mix and growth outlook for our loan portfolio. With that, I'll turn it over to Katie.

Thanks, Nick. Turning to Slide 14. Our overall credit profile remains strong. After a modest increase in nonperforming assets and net charge-offs in the fourth quarter, both came back down in the first quarter. We mentioned in January that the multifamily loan we moved to nonaccrual in the fourth quarter was under a purchase agreement. As planned, this transaction closed in the first quarter, dropping our NPAs back to 0.22%. The Net charge-offs were also very minimal at just 0.05% annualized for the quarter. As we have said before, with the loan portfolio of our size, we do expect to have some modest net charge-offs and upticks in nonperforming assets from time to time, but we have also demonstrated our ability to effectively work through these credits. Overall, our loan portfolio continues to perform well, and we remain well reserved at 1.31% of total loans. Looking at Slide 15. Our watch and special mention loans have remained relatively stable, sitting right around 1% of total loans, while substandard loans declined quarter-over-quarter primarily due to the multifamily loan mentioned previously. We continue to monitor all watch list credits closely, but again, feel good about our overall asset quality and our ability to identify emerging risks within the portfolio. I'll now turn it back over to Joe.

Thanks, Katie. Slide 16 highlights our enhanced capital position, which benefited from some of the balance sheet efficiency initiatives we mentioned earlier. Notably, our CET1 ratio increased from 9.17% to 9.53%. We did not repurchase any shares during the quarter given our strong organic growth pipeline, and where the stock was trading. In fact, we actually announced the launch of an at-the-market offering for the sale of up to $50 million of common stock, which could add approximately 100 basis points to our CET1 ratio if fully executed. However, we did not execute on the sale of any of these shares during the first quarter. While we feel comfortable with our current capital levels, we like the additional optionality and capital cushion the ATM offering can provide if we choose to use it. Given the strong recent performance of the stock, we want to have the optionality to execute on the ATM and and support capital levels if market conditions are favorable. Turning to Slide 17, I'll recap our near-term expectations. As Nick mentioned, we feel we are on track to grow the loan portfolio at a high single-digit pace over the course of 2026. This will be dependent on a variety of factors, especially our ability to continue generating strong core deposit growth as we look to keep our loan-to-deposit ratio in the 95% to 105% range. From a net interest margin standpoint, we have basically already reached our 3% target that we had for the end of the year. As a result, we expect to see just some slow margin expansion from here, assuming no additional rate cuts in 2026. Our main focus remains on growing net interest income which we believe we can do given expectations for margin expansion and continued loan growth. We also expect expense growth to align relatively well with asset growth over time. This may not be the case each quarter, but over the long run, we believe this alignment can continue as we have seen in the past. We feel we are well reserved at current levels and would expect provision to remain dependent on the pace of loan growth and the overall asset quality of the portfolio. We also feel that we can maintain stable capital levels after a solid increase in the first quarter. We also have some future optionality based on market conditions around share repurchases and and the ATM we have in place. I'll now turn it back to Jerry.

Thanks, Joe. Before we open it up for questions, I want to provide a quick progress report on our 2026 strategic priorities. We remain focused on taking market share in a profitable way. In the first quarter, I was pleased to see good loan and core deposit growth. But what was even more exciting was a substantial net interest margin expansion. Our credit culture also continues to show through with minimal net charge-offs. Our affordable housing vertical is another area that we are very focused on in 2026 and and we have seen positive traction in this space as our brand and reputation continue to build. Lastly, on the technology front, we are working through several initiatives, which include bank-wide efforts to set the foundation for leveraging AI thoughtfully across the organization. I'm proud of the team and the efforts put forth in the first quarter and believe we are well positioned for the year ahead. With that, we will open it up for questions.

[Operator Instructions] The first question comes from Brendan Nosal from Hovde Group.

Hope you're doing well Brendan.

Maybe just starting off here on capital. You created what, 30 to 40 basis points of tangible capital this quarter with the security sale. Do you think that lessens the need for you to tap the market with the ATM in your view?

Brendan, this is Joe. Yes. I mean, I think it all depends like we said, I mean, we're going to be opportunistic with the ATM. We like the optionality that it provides. I think we're not going to bank on translating unrealized gains to realized gains. So I just think as we just generally think about capital, I think we're comfortable with where we're at. We're comfortable with the optionality we have on both sides want to be thoughtful about the organic growth prospects that we have. And so I don't think it changes the calculus by kind of the onetime gain that we took.

Okay. Okay. Maybe turning to the hires you made this quarter, I think FTE headcount was up like 15% for the quarter. guess that there is a lot of M&A dislocation in your markets. But just wondering if there's any really notable hires in that number that you're particularly excited about?

Brendan, this is Nick. Yes, I mean, we feel -- we've been saying it for a while that we feel like we're well positioned in the market to take advantage both on the on the client front and the talent front from the M&A disruption. I think sometimes those hires come early in that process, sometimes it takes some time, and we're starting to see the fruits of that labor pay off now. We're really excited about some C&I hires that we've had in the last handful of months. Those folks are really hitting the ground running now and are able to be bringing in some really phenomenal opportunities for us with great local C&I relationships. So -- and around that, we're having to bolster and taking advantage of some of that disruption to bolster in other areas. Katie has done a great job hiring some senior credit folks to assist us in that C&I effort. So overall, we feel like our brand is well positioned to continue to take advantage of that M&A disruption on the hiring front.

Okay. Okay. Great. I'm going to sneak one more in here. Just on the quarter, the actions with the securities portfolio. Do you view that as additive to your prior outlook of the 3% NIM by the end of '26 or just kind of an acceleration of getting there? And I'm asking because if the NIM outlook is still around 3-ish, but the earning asset base is a couple of hundred million smaller is obviously like NII considerations to that dynamic.

Yes. I mean I think the security sales certainly contributed to the margin outperformance, but it was a small amount. I mean, it's 2 basis points in the quarter. So it's just -- there's no one silver bullet certainly, this was part of it. So I think it's not like by not doing that, we are going to miss out on pulling forward margin going forward. So it had an impact. It was just part of the overall strategy itself. But I think the bigger thing, I think, is just the deposit the cost of deposit decline that we experienced and really outperformed in the quarter. I think that, coupled with loan payoffs, I mean, I think as we said, there's we really wanted to not rely on rate cuts and additional rate cuts to really pull forward that margin. So it was definitely an all-hands-on-deck effort to achieve the margin expansion we did in the first quarter.

The next question comes from Jeff Rulis from D.A. Davidson.

Just a question on the M&A side, a lot of discussion of benefiting from disruption. I guess taking the other side of that is just a check in on your outward acquisitions if talking about conversations and the interest, I see it's #2 on your capital priorities of chasing down M&A? Any updates to mention there?

Jeff, it's Jerry. I'd say nothing different than the past. I mean I certainly continue to stay in front of people. I would probably say things appear in the first quarter to have slowed down more than I expected, but I think that has a lot to do with just geopolitical reasons. So we'll see. But it certainly continues to be a priority. But at the end of the day, it's organic growth and continuing to take market share in the Twin Cities as first and formal what we're focusing on.

And maybe on the -- not to focus too much on the margin, but it didn't sound like restructure or kind of the moves you made with the balance sheet didn't have much impact in the quarter. I guess the timing of that, maybe for Joe, was there any tail benefit of those moves that it was 2 basis points this quarter. So that's, I guess, question one on the margin. Is there a tail that you'd expect to see in the second quarter and then the other part is, I guess, as you hit the margin goal, maybe you got to set a new one we get the language of moderate increases from here, but just trying to see about further out where you think a terminal margin could be where the balance sheet sits today.

Yes, Jeff, I'll try to address the first part and the second. I think the -- there's definitely going to be a pull forward or a future impact by just selling those securities and redeploying those into higher yielding loans. So the 2 basis points this quarter, you can certainly -- it was early on in the quarter so you could somewhat annualize that as we redeploy those into loans, earning in the 6s. So that's certainly definitely beneficial. I think as we talked about in the past, the amount of deposits that we have linked to Fed funds, I mean, we're close to $2 billion now. I think to have 75 basis points of cuts in the fourth quarter, really saw obviously a full quarter benefit of that here. And I think that certainly drove the majority of the margin expansion. I think even outperformed our expectation on really deposit betas as we compare it to prior cycles. So super pleased with that. And then obviously, on the loan repricing side, we've kind of laid out that's more spread pretty evenly throughout the year as loans reprice so I think that's where we just more talk about the more kind of mild expansion opportunities. It's pretty front-loaded driven by deposits and then it will be more gradual and back loaded based on assets. and the securities itself were -- I think it's always been a source of strength for us. Our securities portfolio has been above market earnings, certainly. And so -- but by selling the securities by no means do we now have an underperforming securities portfolio that lags on performance. It's certainly additive as well. So I think we'll continue to look for opportunities to rationalize deposit costs lower throughout the year. I mean that will never stop, and we're certainly not going to bank on rate cuts, as I said. I think we're assuming no rate cuts the rest of the year. And we're just really pleased with the expansion we had. I mean we get to -- certainly to experience and that margin uptick ultimately, most focused on growing NII. And I think as the loan portfolio and the loan growth prospects translate that certainly will happen.

Next question comes from Nathan Race from Piper Sandler.

Just going back to the last line of question around kind of the yield pickup on the fixed and adjustable rate loans that are return over the next year. Joe, can you help us just with the yield pickup that we can expect on those 2 portfolios relative to what you laid out in terms of the runoff yield on Slide 21.

Yes. I mean, I think, as I said, it's pretty balanced throughout the year. So it's not like it's concentrated in 1 quarter or the other. I think specifically the adjustable rate portfolio just over $100 million, sub-4%. So as that comes up on reprice and whether that either that pays off or it reprices and resets today at kind of new money yields in the 6s, I think there's certainly additive to margin going forward and to the accretive to the existing loan book. I think the fixed rate portfolio, as we've continued to churn through the reprice over the last couple of years, obviously, that yield and reprice, there's less of a benefit, but there's still certainly a benefit today is that still sub-6%. I just think the other piece that we talked about on the loan payoff front, as deals that have deferred fees associated with them on originations do pay off. that obviously accelerates the fee potential. We saw a pickup here in the first quarter, 12 basis points of the loan yield was loan fees. That's an uptick from prior quarters and it gives us an opportunity to recycle dollars in the low 6s. So I think it's certainly not concentrated. It's spread throughout the year, continue to see that benefit both from new originations and growing the portfolio and then just existing kind of repricing opportunities.

Got it. That's helpful. I appreciate the earlier commentary around kind of deposit costs under the current kind of forward rate outlook. But just curious kind of what you're seeing from a competitive perspective in terms of deposit pricing across the twin cities. And when it comes to deposit gathering, curious if maybe Nick, you could touch on kind of what the latent deposit gathering opportunities look like with some of the team members you brought over recently from some competitors in terms of what the size of their kind of deposit portfolios look like at their prior institutions.

This is Nick. Yes, I mean on the deposit front overall, I mean, it continues to be a competitive market, but we are seeing new deposits come in at costs that are meaningfully lower than we saw last year. We feel really good about the team that we have and their ability to get in front of the right opportunities to bring in core deposits at costs that make sense. The teams that we brought on board or the individuals we brought on board, they're actively prospecting and working through their portfolio. There's low-hanging fruit. On the deposit front that can come over quickly. Those balances tend to come more in the savings and money market side of things, which tend to be a little bit more expensive with operating accounts to follow as our treasury management teams work with their their clients to onboard the full relationship. So overall, we'll be able to blend the cost of those deposits down. But the prospects with these folks to bring in sticky core deposit relationships really both on the consumer or the commercial and the business owner side, which our executive banking team does a phenomenal job of bringing on full deposit relationships with the owners and executives at these companies we feel great about our prospects to continue to grow core deposits over time. The Lake Elmo market that we talked about, we feel like that's a really underserved market, and that long term, we'll be able to grow well within that community. We've hired some great folks on that side of town as well that we feel will drive deposit growth long term. So we feel really good about our deposit pipeline and our ability to drive core deposit growth, especially when we think about the first half of the year being a seasonally low part of the year for us on the deposit front, we grew balances really well in Q4, which is pretty typical for us from a seasonality perspective. And we were not surprised to see some of those balances drift out as our customers did distributions, pay taxes, that sort of thing. So we feel good that we were able to grow deposits even in what is a seasonally more difficult quarter for us to do so.

Got it. That's great color. Really helpful. I apologize if you already touched on this, but if I could sneak one last one in on expenses. Just given the step up in 1Q, I'm curious if there was any kind of front-loading of costs just given the branch opening and maybe some seasonality? And then maybe, Joe, if you could just help us with kind of a starting point for 2Q expenses just to kind of get to that high single-digit growth guide consistent with kind of the loan growth expectations.

Yes, Nate. I think, as we said, the our annual merit cycle, there's always a step-up at the beginning of the year as promotions and merit increases take place. So it's historically and with prior years is a step-up in salaries and benefits. However, I would say, to Nick's point earlier, I mean, we continue to get in front of great people, part of the M&A disruption. And so I think the head count up and just supporting the growth of the organization also contributes to that step-up in salaries. Certainly, Lake Elmo coming online, super excited about that and a little bit of step-up in occupancy, but that market is going to be fantastic for us. And then the other thing is just a real push on marketing and advertising throughout our market. Given the disruption that's been a continued campaign so not kind of a onetime item, but certainly just a continuation of really trying to continue to build the brand. So I think, ultimately, as you said, I think we don't try to look at expenses in isolation on a quarter-over-quarter basis, we're more just thinking about continuing to invest in the business over the long haul. And just given the growth prospects, we feel really good about the investment we continue to make in people and technology. And I think over the long haul, as we've always said, that relationship of asset growth relative to expenses, we still feel like we maintain that I get this first quarter, obviously, with the sale of the securities, that average assets, NIE to average assets ratio does somewhat break down. But I think over the long haul, we're confident that the asset growth and the expense growth will go in line and excited about the investments we continue to make in the business.

Understandable. Makes sense. I appreciate the color.

The next question comes from Brandon Rud from Stephens.

I think I think you just touched on it, but the difference in the period end and average deposits. When you look at good starting point for the second quarter. Would you see deposits kind of closer to the period end level of $4.3 billion or closer to that average level?

Yes. I mean, closer to the period.

And I think, as Nick said, some seasonal outflows with the deposit base, but I do think as taxes get paid distributions get made, I mean those balances build back up. So I think that's a good way to think about it.

Yes, Brandon, I think our low watermark on deposits is usually like early January, late January or mid to late January, I should say, and it typically rebuilds from there. So we feel good about where we ended the quarter.

Okay. Perfect. And just my last one. It seems like a bit of a slower start to the year for the multifam portfolio. Is that more reflective of stronger growth in '25? Or is that a broader trend?

Brandon, this is Nick. I don't think it's a broader trend. I mean, I think quarter-over-quarter, there's some quarters where we see large growth where we have some good originations and a small amount of payoffs and in certain quarters where payoffs outpaces our new loan originations. So we're not -- I'm not overly concerned around what we saw in Q1 within that portfolio. Our teams continue to be in front of the right clients and building deep relationships with folks. We mentioned our advances, we've seen an uptick in both multifamily and CRE construction in the last 12 months. So that's providing some tailwinds for us to build construction advances and those loans once complete and stabilize to sort of roll into our multifamily and CRE buckets, creating some growth in those categories as well as those construction projects convert. So no, I mean, our pipeline remains really strong. We feel really good about the opportunities we have in front of us. And I think we are continuing our trend over the last handful of years of really being disciplined in our growth approach, being laser focused on trying to grow our loans in line with deposits. And remaining in front of as many folks as we can to build a really strong pipeline and then be selective on the credits that we feel the best about and the ones in which we can add to the balance sheet in a profitable way.

Okay. Perfect.

This concludes our question-and-answer session. I would like to turn the conference back over to Jerry Baack for closing remarks.

Thanks, everyone, for joining our call today. We're really excited about 2026 and the growth and profitability outlook that that is in front of us and continuing to take advantage of the M&A disruption in the Twin Cities so big shout out to our team members are veterans and our new hires. It's -- we have a phenomenal team here and appreciate everything they do. Everybody, have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.