Bridgewater Bancshares Inc (BWB) 2025 Q3 法說會逐字稿

Good morning and welcome to the Bridgewater Bancshares 2025 third quarter earnings results call. My name is Megan and I will be your conference operator today. [Operator Instruction] 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, Megan, 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, Katie Morrell, Chief Credit Officer, and Jeff Shellberg, Deputy Chief Credit Officer. In just a few moments, we will provide an overview of our 2025 third quarter financial results. We'll be referencing a slide presentation that is available on the investor relations section of Bridgewater's website, investors.bridgewaterbankemail.com.

Following our opening remarks, we will open the call for questions.

During today's presentation, we may make projections or other forward-looking statements 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. We see the forward-looking statement disclosure in the slide presentation in our 2025 third 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 September 30, 2025, 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 in 2025 third quarter earnings release for reconciliation 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 everyone for joining us this morning. In the third quarter, our team continued to demonstrate our ability to take market share by growing deposits and generating loans, which resulted in steady net interest income growth.

We saw strong core deposit growth with balances up 11.5% annualized. This continues to be a testament to our talented banking teams and the relationship model we prioritize. The relatively steady pace of poor deposit growth we have seen over the past year has positioned us to be more aggressive on the loan front as our loan deposit ratio remains near the lower end of our target range.

We generated strong loan growth of 6.6% annualized during the third quarter as we continue to see growth across multiple asset classes, including the affordable housing space.

This helped drive a $1.6 million increase in net interest income during the quarter.

We also saw one basis point of net interest margin expansion to 2.63%. Joe will talk more about the margin in a minute, but we are optimistic about our ability to see more meaningful expansion in the coming quarters.

Asset quality continues to be a strength as non-performing assets remained at consistently low levels, and net charge-offs were just 0.03% of loans.

We continue to see some modest risk rating migration within the portfolio, which our Chief Credit Officer Katie Morrell will touch on shortly, but we continue to feel good about the portfolio overall.

Lastly, we've developed a reputation for consistently building tangible book value, which you can see on slide four. As tangible book value per share increased 20% annualized in the third quarter and is up 14% annualized year-to-date.

This continues to be how we drive shareholder value.

Before I turn it over to Joe, I want to share an update regarding the successful completion of two significant initiatives in the 3rd quarter the launch of our new retail and small business online banking platform in July and the systems conversion of our acquisition of Minnetonka City Bank, and Citibank in September.

The new online banking platform gives our clients an updated, robust platform to enhance the way they manage their finances at Bridgewater. In addition, it provides our smaller entrepreneurial clients with a platform designed specifically for them.

The team worked tirelessly to ensure smooth migrations initially for Bridgewater clients and then convert to our newly acquired clients a few months later.

The success of both conversions reinforced my Confidence that we have the right team to take advantage of future M&A opportunities as they become available.

In August we also announced some transitions to our strategic leadership team, most notably Mary Jayne Crocker, our Chief Strategy Officer, and Jeff Shellberg, our Chief Credit Officer, will both be retiring in 2026.

Mary Jayne will join our board of directors next year while Jeff will continue to work alongside Katie in a deputy Chief Credit Officer role until his retirement, ensuring Bridgewater's credit culture remains consistent.

Jeff and Mary Jane have been with me at Bridgewater since founding the bank in 2025. I'm so appreciative of their contributions and quite simply, Bridgewater would not be what it is without them.

By executing the succession plan we have been working on for a few years, I am confident in the leadership of the bank going forward.

We elevated Katie Morrell to Chief Credit Officer, Jessica Stejskal to the new role of Chief Experience Officer, and Laura Espeseth to her role of Chief Administrative Officer.

All three are talented individuals with strong work ethics, bring in a diverse set of skills. I am thrilled that we have the internal talent to continue to drive our unconventional culture and continue our growth trajectory.

Overall, I believe Bridgewater is well positioned as we head into the 4th quarter and in 2026. Our outlook for loan and deposit growth remains very strong as we continue to see opportunities from M&A disruption in the Twin Cities.

Our goal is to grow to become a $10 billion dollar bank by 2030, and we believe we're on track to get there.

Our balance sheet is well positioned for meaningful net interest margin expansion in this rates down environment.

With the system's conversions behind us, we look for expense growth to return to more normalized levels in line with asset growth, and the Twin Cities market trends remain favorable, which will hopefully support continued strong asset quality.

With that, I will turn it over to Joe.

Thank you, Jerry.

Slide five highlights another quarter of strong net interest income growth driven by annualized average earning asset growth of 16% and one basis point of net interest margin expansion to 263.

As we mentioned last quarter, we were not expecting much margin expansion in the third quarter as we anticipated the higher asset yield repricing to be mostly offset by a couple of specific headwinds, which is what we saw.

The most notable headwind was the $80 million of subordinated debt at 7.625 we issued in June, which we used to redeem $50 million of outstanding subordinated debt at 5.25%. This created a 6 basis point net drag on margin in the third quarter.

We also continue to see the ongoing benefit of the purchase accounting accretion diminish as it contributed just 4 basis points to margin during the quarter.

In addition, we had higher than expected average cash balances in the Third quarter due to our strong deposit growth.

While this put added pressure on the margin, we view it as a good thing as it created more net interest income dollars and gives us more funding to deploy into future loan growth.

Looking ahead, we are well positioned for more meaningful net interest margin expansion in the 4th quarter and into 2026, especially given the full quarter impact of the September rate cut and the potential for additional cuts. In fact, we believe we have a path to get to a 3% margin by early 2027.

Combining our margin expansion with the loan growth outlook that Nick will talk about in a few minutes, we are in a great position to continue driving net interest income growth from here.

Turning to slide six, our loan yields continue to re-price higher even in the current environment.

Loan yields increased 5 basis points during the third quarter, which was a slower pace in the second quarter as we saw less.

New originations and payoffs resulting in less overall churn of the portfolio.

With $608 million of fixed rate loans scheduled to mature over the next 12 months at a weighted average yield of 569 and another $140 million of adjustable rate loans repricing or maturing at 385, we still have more loan repricing upside ahead of us as new originations in the third quarter were in the mid-6s.

We would expect this repricing to be a tailwind margin going forward, especially as the portfolio continues to turn over.

Overall, total earning asset yields increased 7 basis points to 563 as we also saw an increase in securities yields during the quarter.

The cost of total deposits were 319, continuing the stabilization trend we have seen throughout 2025. However, we should see deposit costs decline in the fourth quarter as we have 1.7 billion of funding tied to short-term rates, including 1.4 billion of immediately adjustable deposits that we reprice lower immediately following the recent rate cut in mid September.

Turning to slide seven, we continue to see strong revenue growth trends driven by the momentum in net interest income.

Fee income has also been a contributing component to revenue growth in recent quarters due to increased swap fee income and investment advisory fees.

We did see fee income decline in the third quarter. However, due to the lack of swap fee income. We mentioned last quarter that swap fees would continue to be part of the revenue mix going forward, and we expect that to continue to be the case. However, this just highlights the lumpiness of these fees. Over the past five quarters, swap fees have averaged about $300,000 per quarter, but have ranged from 0 to nearly $1 million.

I can say that we expect a rebound in swap fees in the fourth quarter as we have already booked some in October.

On slide, as expected, the higher than usual increase in non-interest expenses we have seen year-to-date continued in the third quarter as we have had some redundant expenses this year leading up to the core conversion.

We added 17 full-time equivalent employees during the quarter, which drove an increase in salary expense.

Marketing expenses were also elevated during the quarter due to advertising directly related to our focus on bringing talent and clients from the old national and Bremer disruption, which have been bearing fruit.

We feel much of the higher expenses in the third quarter were really opportunistic in nature as we continue to position the bank for ongoing growth.

Now that the system's conversion is behind us, we would expect expenses to return to growing more in line with asset growth over time.

With that, I'll turn it over to Nick.

Thanks, Joe.

Slide nine highlights the strong core deposit momentum we have seen over the past year, which continued in the third quarter as core deposits grew 11.5% annualized and are now up 7.4% annualized year-to-date.

Core deposits are the lifeblood of what we do here. This more consistent growth we have seen in recent we've seen recently provides us the ability to grow the bank in a more profitable way.

You can see it from a deposit mix shift standpoint. During the third quarter, non-interest-bearing deposits increased approximately $35 million while broker deposits declined by about the same amount.

Overall, we continue to feel good about the core deposit pipeline, especially given opportunities out there related to the local emanated disruption.

Turning to slide 10, as we mentioned last quarter, we expected loan growth to be in the mid to high single-digits in the second half of the year after outperforming these expectations in the first half. And this is what we saw in the third quarter as loan balances increased 6.6% annualized and are now up 12% annualized year-to-date.

Generating loan growth has never been a problem for Bridgewater. With more consistent core deposit growth, loan pipelines that remain at 3-year highs, opportunities from M&A disruption and a 98% loan to deposit ratio that is in the lower half of our target range, we are in a good position to continue being aggressive on the loan front.

We also had several deals we expected to close in the third quarter that were pushed out a quarter. As a result, we should have a bit of a head start here in the fourth quarter.

Overall, we continue to expect near term loan growth to be in the mid to high single-digit range.

This will of course be dependent on the ongoing pace of core deposit growth as well as loan payoffs, which can be difficult to predict.

Turning to slide 11, you can see our loan origination activity, which was down a bit in the third quarter, primarily due to some deal closing sliding from the third quarter to the fourth quarter, as I mentioned earlier. We would expect this to pick back up in the fourth quarter as our pipeline remains at a three year high.

Payoffs have also trended a bit lower recently and while payoffs are a drag on loan growth, these recycled dollars will allow us to continue to fund new loan originations at attractive yields.

Turning to slide 12, the loan growth we saw in the third quarter was spread across several key asset classes, including construction, multi-family, non-owner occupied CRE, and even one to four family.

As mentioned last quarter, that construction was an area where we would be seeing more balance sheet growth following an increase in new construction projects in the back half of 2024. These projects are now starting to fund, driving an increase in balances in the third quarter. We would expect this to continue being a catalyst for loan growth throughout 2026.

While it isn't called out in its own section of the portfolio, we continue to have success in our national affordable housing vertical as this drove much of the multi-family growth during the quarter.

With that, I'll turn it over to Katie.

Thanks Nick, slide 13 provides a closer look at our multi-family and office exposure. We continue to see positive multi-family trends in the Twin Cities. This includes lower vacancy rates, which recently dropped below 6%, strong absorption, and reduced use of concessions, all of which suggest a favorable outlook for higher levels of net operating income.

We continue to expand our affordable housing business both locally and on a national basis. The portfolio now totals $611 million with $467 million in multi-family, while the rest is inland, construction, or non-real estate.

The total portfolio has grown at a 27% annualized pace year-to-date. We feel good about this portfolio from a credit standpoint as we continue to work with experienced developers across the country and because of the shortage of affordable housing nationwide.

Our non-owner occupied Cri office exposure remains limited at just 5% of total loans. We continue to work through the one central business district office loan that is rated substandard and on non-accrual, but overall, we feel good about our office portfolio.

Turning to slide 14, our overall credit profile remains strong. Our reserve level of 1.34% is conservative compared to peers, and our non-performing assets held steady at just 0.19% of total assets, well below peer levels.

Net chargeoffs also remained very low at 0.03% of average loans. The minimal amount of charge-offs we had during the quarter were related to the legacy First Minnetonka City Bank portfolio.

Turning to slide 15, our classified loans remain at relatively low levels. We did have one multi-family loan that migrated from special mention to substandard during the quarter. This was the loan that we moved to special mention last quarter while it was under a purchase agreement. Unfortunately, that purchase agreement was canceled and we decided to move the loan to substandard while we actively monitored new sales prospects for the property. The borrower remains engaged with the bank and is committed to moving the asset quickly.

Importantly, we do not see any systemic credit issues as our overall portfolio is performing well and the multi-family sector continues to show favorable trends. I'll now turn it back over to Joe.

Thanks Katie. Slide 16 highlights our capital ratios, which remain relatively stable in the third quarter, with our CET1 ratio increasing slightly from 903 to 908.

We did not repurchase any shares during the quarter given our strong organic growth pipeline and where the stock was trading.

As of quarter end, we still have 13.1 million remaining under our current share repurchase authorization.

In the near term, we expect capital levels to hold relatively stable given retained earnings and a stronger growth outlook.

Turning to slide 17, I'll recap our near term expectations.

Given our strong loan pipelines and opportunities we continue to see in the market, we believe we can continue to generate mid to high single-digit loan growth in the near term.

Core deposit growth will continue to be a governor here, but we feel we are in a good spot to be offensive minded as our target loan to deposit ratio remains 95 to 105.

While net interest margin increased just one basis point in the 3rd quarter, we feel bullish about more meaningful margin expansion over the next several quarters. We believe we have a path to get back to a 3% margin by early 2027, driven both by loan yields repricing higher and deposit costs declining with additional Fed rate cuts.

At the end of the day, our focus is on driving net interest income growth, which will come from both the margin expansion and our stronger loan growth outlook.

Non-interest expense growth has been higher than what we have typically seen due to the later systems conversion, but now that that is behind us, we expect to return to growing expenses relatively in line with asset growth over time.

We also 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. I'll now turn it back to Jerry.

Thanks Joe. Finishing on slide 18, I want to provide a quick update on our 2025 strategic priorities.

As we suggested earlier, we have clearly returned to a more normalized level of profitable growth in 2025 with 12% annualized loan growth and 7% annualized core deposit growth year-to-date.

With a strong marketing campaign and talented team of bankers, we continue to take market share in the twin cities, both on the loan and deposit fronts. Our brand is stronger than ever. We continue to build strong relationships, and we are taking advantage of the ongoing M&A disruption.

Our technology and operations team successfully rolled out our new retail and small business online banking platform while also completing the system's conversion of our First Minnetonka City Bank acquisition.

As we look forward, we do plan to close one of the two branches we acquired from First Minnetonka City Bank. This will provide some additional efficiencies as we have branch coverage in the area. Well, this brings us to 8 branches, we will be bumping back up to 9 when we open a de novo branch, expanding our footprint into the east metro of the Twin Cities in early 2026.

With that, we'll open it up for questions.

(Operator Instruction)

Jeffrey Rulis, D.A. Davidson & Company

Jeff, are you there? We can't hear you.

Hi, can you hear me now?

There you go.

Yes, we can hear you.

Okay, sorry about that. On to the margin path that you outlined towards 3%.

Wanted to see if if appreciate the the visibility there but I guess over the course of a year plus you expect that improvement to be fairly measured or is it ramp later any sense I know there's a lot of inputs there with rates and such, but any idea how that kind of that path towards their transitions.

Hey Jeff, this is Joe. Yeah, I think generally it's it's fairly steady. I mean, it's 2 to 3 basis points a month. I will say, we are assuming those cuts happened just 2 of them happened in October and in December. So, the deposit piece might be more front loaded, but the asset side, as we lay out our portfolio, roughly $750 million of fixed and adjustable rolling off.

Kind of in the mid-fives, so I think that will happen, pretty steady throughout 2026. But yeah, we think it's very much achievable with just two costs assumed early on.

Got it. Thanks. And then maybe rate related and turning towards the credit side and maybe for Katie or Jeff just on the, it's kind of a clumsy question, but I would assume rate cuts would would offer some relief to your borrowers. Have you run any analysis of the percent of borrowers, sort of a tangible benefit of fi50 basis points and cuts or more? I don't know if there's a Or come in the form of upgrades with cash flow relief. Anything you could quantify on the expected rate cuts and what that might mean for the health of the loan portfolio.

I don't think we have anything quantified to share, but I mean we are proactively, getting ahead of any loans with repricing risk. We feel like that's getting materially better, since the last 18 months to 24 months. So certainly any further reduction in rates will only benefit those loans that are repricing and currently at a fixed rate over the next year. And a lot of those also, with the repricing risk, we potentially have action plans already in place with borrowers due to covenant failures or the pending reprice. So, we feel, really good about having gotten ahead of of any from a credit risk standpoint that have heavy pricing risk so.

Appreciate it, yeah, probably a little early, but that's helpful.

Maybe just one last one sort of a housekeeping trying to map the merger costs was that truly in other I know you you kind of broke out in slide eight that the cost. I'm just trying to.

Mesh that with the press release, anything in professional and consulting or is it truly absent out of comp, out of professional consulting, truly other.

Yeah, the slide in, that we lay out non-interest expense folds it out.

And just highlights it so those costs that were specifically related to the merger itself.

So I think when we talk about this quarter, the kind of the increase in expenses was more salaries related, ordinary course, marketing, given our offensive minded efforts around OMB and Bremmer, advertising specifically and then just general, consulting fees, so.

I don't know if that's answering your question.

Yeah, I guess to go forward, the messaging is that obviously we think the merger costs kind of go away and you're talking about the core costs even coming down or normalizing with the pace of growth.

That's that's essentially the message.

Yeah, definitely. I think this was kind of the last quarter where we had that redundancy in expenses, but I think, as we look forward into 4Q and then into 26, we view expenses growing similar to how they did pre-deal where it's, assets and expenses growing in line.

You can see that in the core kind of NIE to average assets, it's been steady at 143 the last couple of quarters, so we envision we grow at a mid to high single-digit pace next year that expenses would would grow in line.

Great. Thank you.

(Operator Instruction). Nosal Brendan, Hovde Group.

Hey, good morning folks, thanks for taking the question. Hope you're doing well.

Hi Brendan,

just to circle back to, kind of the margin outlook, really appreciate you guys putting a stake in the ground, a little further out than you typically do, just kind of on the moving pieces of that 3% margin, get the rate cut commentary out of the Fed that's underpinning that, can you just speak to kind of assumptions for, what the belly of the yo does and how that impacts, that lowering pricing and then. If you look at that roughly 40 basis points of margin improvement that you're kind of calling for, can you just bifurcate that between, relief on the funding side and you'll pick up on the loan side.

Yeah, Brendan, this is Joe. I think we envisioned kind of the belly of the curve, really staying where it is, maybe some slight decline, but I think they're, I think slope, as we've always said, is is our is our friend, certainly. So if we kind of have a terminal Fed funds rate in the mid 3s and the 5 to 10 year part of the curve where it's at. I mean, that's what our assumption is. Now granted, you get more cuts or you get some flattening or steepening. I think obviously those have impacts too, but nonetheless, I think, slope is certainly our friend.

On the other side in terms of bifurcating loans and deposits, I just think the comments similar to earlier where you know there's continued repricing you know throughout 2026 on the asset side, both fixed and adjustable rate loans. I also think just given the pick up and origination activity, the churn of the portfolio, certainly, buoys or increases earning asset yields specifically in the loan book. And then the deposit portfolio, I think, is most sensitive that a billion 7 that we highlight.

We'll obviously benefit with those first two cuts that we're assuming here in October and December and then the rest of the portfolio we continue to rationalize lower in a different rate environment. So, I think it's it's both sides coordinated effort, but I think very achievable as we think about it throughout 26, like I said, it's 2 to 3 basis points a month. Considering the dynamics of the composition of the balance sheet, if we're putting on loans, low to mid-sixes and kind of incremental additional new funding in the low 3s, we think that spread in itself is very much accretive to the existing margin.

So all of that coupled together is, how we can feel confident about that path to early 207.

Yeah, okay, thanks for the color there that makes sense. Maybe just kind of switching gears to, the affordable housing piece, just kind of curious what the comfort level is and kind of growing the national piece of that book. I think the national piece is only like 4% of loans today maybe that are kind of out of market at this point, just kind of curious how high you're comfortable taking this over time.

Hey Brandon, this is Nick. Yeah, this has been maybe somewhat recent that we've been sharing our activity level within this space, but it's certainly not a new business line for us. It's something that we've been involved with going back to probably 2007. So we have a deep history and working knowledge within the space. So I think that is sort of a foundational piece that gives us a lot of comfort in understanding. Not only the transactions that we get involved with, but vetting through the borrowers that we're meeting with that are new to us as we've expanded our our reach beyond, the Minneapolis St. Paul market.

So the quality of borrower that we've been focusing on is really top tier, and we feel really good about the pieces that we're getting involved with on those transactions. Being relatively short-term in nature, refinancing stabilized properties as they're coming out of their compliance period, or, providing sort of ancillary pieces of debt that are relatively short-term that turn pretty quick. So, overall we feel really good about how we're positioned in that space. We feel like it's an underserved market that we have we're well positioned to be able to. A provide our banking services to and grow on both sides of the equation of the balance sheet, certainly the loan side is maybe what we shared.

With the prepared remarks, but that has been a really good source of growing core deposits as well as those client relationships are eager for a relationship bank that understands their business and are open to, moving their deposit balances to us, even if they are, based outside of the Twin Cities. So it certainly is a relationship game for us and we're not looking for transactional business there. So for a lot of those reasons we feel good about where we're positioned in that space and how we see it providing a growth path for us in the future.

Okay, alright, well thank you for your thoughts, Nick, and I appreciate you guys taking the questions.

Thanks, Brendan.

(Operator Instruction). Nathan Race, Piper Sandler Companies.

Good morning, everyone. I appreciate you taking the questions.

Just going back to the low growth outlook, I appreciate, your term expectations haven't really changed, but it seems like you guys are being pretty offensive in terms of some of the hires that you completed in the quarter and your, Maybe there's more to come on that point. So just curious, if we can expect any step change function in terms of kind of the growth trajectory in the next year. Is it possible we can get back to kind of a stronger pace of growth that we saw both in terms of loans and deposits prior to the rate hiking cycle starting in 2022.

Yeah, he needs this, Nick. Yeah, I mean, we feel really good about where we're at, from a loan growth outlook perspective, I think one thing that we're mindful of is.

And I think we've made a lot of progress in the last, 18 months about aligning our loan growth to be, more consistent with our deposit growth specifically on the core deposit front. So, I think that that's a strategy that we're trying to employ as we think about our future loan growth, that that does.

Provide us with a more profitable path on a go forward basis.

So I think it's certainly that engine is there and the potential is there to grow faster than that. I think we're just trying to be, both selective on sort of the client relationship front and the profitability front as we think about our loan growth.

To ensure that we're not putting ourselves in a loan deposit, position that, forces us to really pull back our on growth in a quarter or two just to as we if we outperform our expectations. So, we feel good about a lot of the verticals that we're in, the disruption that we talked about within the Twin Cities is real and you know we've been able to have great conversations with both clients that are impacted, and production staff, and and I think those conversations will continue here, over the next year as clients are transitioned over and as, personnel find their new normal at the new organization and we're expecting to be beneficiaries on both of those fronts, so that's certainly something that could impact the amount of our loan growth as we we bring on production staff hopefully over the next year or so.

Got it. That's really helpful. And Nick, you may just touch on where you expect to see these hires, impact. I mean, are these more C&I related or any color in terms of, potential, growth impacts that we can see across the balance sheet.

Yeah, I mean that's certainly something that we've had as a strategic priority to improve our expertise and depth of knowledge in that space. So yeah, definitely there's conversations within that.

Within that front, but we've always been opportunistic in our hiring, and that's really across the bank, whether that's production staff or operations folks, compliance and BSA, I mean. There's a lot of really talented banking personnel here in the Twin Cities, and we're open to having conversations with all of them specifically to the production front though, I think, we TRY to differentiate ourselves by thinking about sort of niche business lines and to the extent that we can expand into a new vertical through the acquisition of a. A person or or or a team, we're we're definitely open to that as well and we're having conversations sort of across all those fronts now and I'm hopeful that some of those will pay off here in 2026.

Okay, great. Then a couple of questions for Joe. There's some differences in the and if your average cash balances, I've imagined the sub debt impact had some relevancy there. Just curious if you can touch on kind of where you'd like to run in terms of cash levels going forward and then also look like the securities yields picked up nicely in the quarter. Just any thoughts on the securities yield trajectory from here in light of the great outlook.

Yeah, I think on the cash side, I think we were generally just really pleased with, the core deposit growth that translated during the quarter. I think a lot of that we'd message, with some seasonal outflows in the second quarter would come back in the third. So we did certainly have higher average cash balances throughout the quarter.

I think we're always.

Ultimately loan growth being top priority and given pipelines where they're at, I think we, when we think about cash and securities, we always want to have liquidity such to fund that growth, from the security standpoint, yields going forward, there were opportunities, I think just given where rates were at kind of more mid-quarter where we saw some opportunities to put on some some longer duration paper. So part of that, contributed to the higher, boost in securities yields during the quarter and then I think where we're at today, we're definitely active just kind of redeploying as there's, pay downs, payoffs, maturities, some of that's also just recycling FMCB's portfolio, which we had always kind of planned, once we closed the deal last last year. So, I think we're we're opportunistic in the security space as well, but I think ultimately, we want to support the loan growth outlook.

And I think that where the pipelines at, I think that's that's certainly bullish on continued growth there in 206.

Okay, great. And then maybe a couple for Katie, on the loan that we've talked about a couple quarters now, I believe you guys have a specific allocation there, just curious if you're still expecting some charge-offs there at some point in the future and if there's any specific reserves on the credit that move to substandard in 3Q.

So, yeah, starting with the office loan, our specific reserve hasn't hasn't changed on that one. It's just under $3 million and we continue to see, leasing prospects, and some interest. There's been more, return to the office in downtown Saint Paul, so we're. Not planning a charge off at this time on that loan. And then in regards to the multi-family loan that we moved this quarter, that one does not have a specific reserve and like we shared in the prepared remarks, the borrowers, sort of moving quickly to re-engage a new buyer and hopefully sell that asset quickly, so.

Okay, I appreciate all the color. Thanks everyone.

(Opertaor Instruction).

I want to thank everybody for joining the call today. We're really excited about, our ability to take market share in the Twin Cities market and I believe the 4th quarter in 2026 will certainly be a good year for us. I do want to call out and thank some of the team members that we have here our deposit operations, technology and operations team really.

Busted their butts these last few months to get the conversions done successfully.

And also just want to do another shout out for Mary Jayne Crocker and and Jeff Shellberg and how incredible they've been as partners for me.

Considering 20 years ago we started this bank in our basement, so, it's great to still be on the board supporting us going forward, but a great shout out to them. Thanks for taking the call today. Thanks.

I don't know.

The conference is now concluded.

Thank you for attending today's presentation. You may now disconnect.