Bridgewater Bancshares, Inc. BWB Form 10-Q filing Q1 FY2026

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PART 1 – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (unaudited)

Item 1. Consolidated Financial Statements

Bridgewater Bancshares, Inc. and Subsidiaries

Consolidated Balance Sheets

(dollars in thousands, except share data)

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See accompanying notes to consolidated financial statements.

Bridgewater Bancshares, Inc. and Subsidiaries

Consolidated Statements of Income

(dollars in thousands, except per share data)

(Unaudited)

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See accompanying notes to consolidated financial statements.

Bridgewater Bancshares, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(dollars in thousands)

(Unaudited)

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See accompanying notes to consolidated financial statements.

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Bridgewater Bancshares, Inc. and Subsidiaries

Consolidated Statements of Shareholders’ Equity

Three Months Ended March 31, 2026 and 2025

(dollars in thousands, except share data)

(Unaudited)

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See accompanying notes to consolidated financial statements.

Bridgewater Bancshares, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(dollars in thousands)

(Unaudited)

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See accompanying notes to consolidated financial statements.

Bridgewater Bancshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

Note 1: Description of the Business and Summary of Significant Accounting Policies

Organization

Bridgewater Bancshares, Inc. (the “Company”) is a financial holding company headquartered in St. Louis Park, Minnesota, whose operations consist of the ownership of its wholly-owned subsidiary, Bridgewater Bank (the “Bank”). The Bank commenced operations in 2005 and provides retail and commercial loan and deposit services, principally to customers within the Twins Cities MSA. In 2008, the Bank formed BWB Holdings, LLC, a wholly-owned subsidiary of the Bank, for the purpose of holding repossessed property. In 2018, the Bank formed Bridgewater Investment Management, Inc., a wholly-owned subsidiary of the Bank, for the purpose of holding certain municipal securities and to engage in municipal lending activities.

Recent Developments

In February 2026, the Company opened a new branch location in Lake Elmo, Minnesota to expand the Company’s presence in the eastern side of the Twin Cities market.

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On February 27, 2026, the Company and its wholly owned subsidiary, Bridgewater Bank, entered into an equity distribution agreement with Piper Sandler & Co., as distribution agent, pursuant to which the Company may offer and sell, from time to time, shares of its common stock with an aggregate gross sales price of up to $50.0 million, including through “at-the-market” offerings and other permitted methods. The distribution agent is entitled to a commission of 2.5% of the gross sales price of the common stock sold in such offering. The Company is not obligated to sell any shares of its common stock pursuant to the equity distribution agreement, and may suspend or terminate sales thereunder at any time. Any shares sold will be issued pursuant to the Company’s effective shelf registration statement on Form S-3 and related prospectus supplement, and net proceeds, if any, are expected to be used for general corporate purposes, including investments in or advances to the Company’s subsidiaries, working capital, capital expenditures, stock repurchases, debt repayment, or potential acquisitions.

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Basis of Presentation

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include all disclosures necessary for a complete presentation of the consolidated balance sheets, consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of shareholders’ equity and consolidated statements of cash flows in conformity with U.S. generally accepted accounting principles (“GAAP”). However, all normal recurring adjustments which are, in the opinion of management, necessary for the fair presentation of the interim financial statements have been included. The results of operations for the three months ended March 31, 2026 are not necessarily indicative of the results which may be expected for the entire year. For further information, refer to the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 26, 2026.

Principles of Consolidation

These consolidated financial statements include the amounts of the Company, the Bank, with locations in Bloomington, Greenwood, Lake Elmo, Minneapolis (2), Minnetonka, Orono, St. Louis Park, and St. Paul, Minnesota, BWB Holdings, LLC, and Bridgewater Investment Management, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates in Preparation of Financial Statements

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Information available which could affect judgements includes, but is not limited to, changes in interest rates, changes in the performance of the economy, including elevated levels of inflation and possible recession, and changes in the financial condition of borrowers.

Material estimates that are particularly susceptible to significant change in the near term include the determination of the allowance for credit losses (“ACL”).

Segment Reporting

An operating segment is generally defined as a component of a business for which discrete financial information is available and whose operating results are regularly reviewed by the chief operating decision maker (“CODM”). Substantially all of the Company’s operations involve the delivery of loan and deposit products to clients. The Company’s CODM makes operating decisions and assesses performance based on an ongoing review of the banking activities, which constitute the Company’s only operating segment for financial reporting purposes. The Company’s single segment is managed on a consolidated basis by the CODM who is the Chief Executive Officer.

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The accounting policies of this segment are the same as those described in Note 1 of the Company’s most recent Annual Report on Form 10-K, filed with the SEC on February 26, 2026, concerning significant accounting policies. The CODM assesses performance of the segment and determines the appropriate allocation of Company resources based on consolidated net income, which is reported in the Consolidated Statements of Income. Consolidated net income is used in deciding where to deploy capital, and to monitor how budget compares to actual results. It is also used in benchmarking performance measures to Company peers for compensation related analysis. The measure of segment assets is reported on the Consolidated Balance Sheets as total consolidated assets.

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Note 2: Earnings Per Share

Basic earnings per common share are computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per common share are computed by dividing net income available to common shareholders by the weighted average number of common shares, adjusted for the dilutive effect of stock compensation. For the three months ended March 31, 2026 and 2025, stock options and restricted stock units totaling 195,030 and 993,727, respectively, were excluded from the calculation because they were deemed to be anti-dilutive.

The following table presents the numerators and denominators for basic and diluted earnings per share computations for the three months ended March 31, 2026 and 2025:

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Note 3: Securities

The following tables present the amortized cost and estimated fair value of securities with gross unrealized gains and losses at March 31, 2026 and December 31, 2025:

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March 31, 2026

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December 31, 2025

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Securities with a carrying value of $106.8 million and $254.3 million were pledged to secure borrowing capacity at the Federal Reserve Discount Window as of March 31, 2026 and December 31, 2025, respectively.

The following tables present the fair value and gross unrealized losses of securities with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2026 and December 31, 2025:

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At March 31, 2026 and December 31, 2025, 376 and 372 debt securities had unrealized losses with aggregate depreciation of approximately 7.4% and 7.2%, respectively, from the Company’s amortized cost. These unrealized losses have not been recognized into income because management does not intend to sell these securities, and it is not more likely than not it will be required to sell the securities before recovery of its amortized cost basis. Furthermore, the unrealized losses are due to changes in interest rates and other market conditions and were not reflective of credit events. To make this determination, consideration is given to such factors as the credit rating of the issuer, level of credit enhancement, changes in credit ratings, market conditions such as current interest rates, any adverse conditions specific to the security, and delinquency status on contractual payments. As of March 31, 2026 and December 31, 2025, there was no allowance for credit losses carried on the Company’s securities portfolio.

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Accrued interest receivable on securities, which is recorded within accrued interest on the balance sheet, totaled $3.3 million and $6.2 million at March 31, 2026 and December 31, 2025, respectively, and was excluded from the estimate of credit losses.

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The Company has entered into fair value hedging transactions to mitigate the impact of changing interest rates on the fair value of securities within the portfolio. See Note 6 – Derivative Instruments and Hedging Activities for additional information.

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There was a $7.3 million net realized gain as a result of sales from the securities portfolio for the three months ended March 31, 2026, which included a net gain of $10.4 million recorded on the termination of fair value hedges on treasury and municipal securities.

The following table presents a summary of the amortized cost and estimated fair value of debt securities by the earlier of expected call date or contractual maturity as of March 31, 2026. Call date is used when a call of the debt security is expected, as determined by the Company when the security has a market value above its amortized cost. Contractual maturities will differ from expected maturities for mortgage-backed, U.S. government agency securities and asset-backed securities because borrowers may have the right to call or prepay obligations without penalties.

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The following table presents a summary of the proceeds from sales of securities available for sale, as well as gross gains and losses, for the three months ended March 31, 2026 and 2025:

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Note 4: Loans and Allowance for Credit Losses

The following table presents the components of the loan portfolio at March 31, 2026 and December 31, 2025:

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The following tables present the aging in past due loans and loans on nonaccrual status, with and without an ACL by loan segment, as of March 31, 2026 and December 31, 2025:

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The Company aggregates loans into credit quality indicators based on relevant information about the ability of borrowers to service their debt by using internal reviews in which management monitors and analyzes the financial condition of borrowers and guarantors, trends in the industries in which the borrowers operate, and the fair values of collateral securing the loans. The Company analyzes all loans individually to assign a risk rating, grouped into six major categories defined as follows:

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Pass: A pass loan is a credit with no known or existing potential weaknesses deserving of management’s close attention.

Watch: Loans classified as watch have a credit where the borrower’s financial strength and performance has

been declining and may pose an elevated level of risk. Watch loans have been identified as having minor deterioration in loan quality or other credit weaknesses/circumstances meriting closer attention of management.

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Special Mention: Loans classified as special mention have a potential weakness that deserves management’s

close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company’s credit position at some future date. Special mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. This is a transitional rating and loans should not be classified as special mention for more than one year.

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Substandard: Loans classified as substandard are not adequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the repayment of the debt. Well defined weaknesses include a borrower’s lack of marketability, inadequate cash flow or collateral support, failure to complete construction on time, or the failure to fulfill economic expectations. They are characterized by the distinct possibility that the Company will sustain loss if the deficiencies are not corrected.

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Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or repayment in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loss: Loans classified as loss are considered uncollectible and charged-off immediately.

The following tables present loan balances classified by credit quality indicator by year of origination as of March 31, 2026 and December 31, 2025:

March 31, 2026

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December 31, 2025

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The following tables present the activity in the ACL, by segment, for the three months ended March 31, 2026 and 2025:

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The following tables present the balance in the ACL and the recorded investment in loans, by segment, as of March 31, 2026 and December 31, 2025:

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The following tables present the amortized cost basis of collateral dependent loans by the primary collateral type, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans, as of March 31, 2026 and December 31, 2025:

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Accrued interest receivable on loans, which is recorded within accrued interest on the balance sheet, totaled $12.3 million and $12.7 million at March 31, 2026 and December 31, 2025, respectively, and was excluded from the estimate of credit losses.

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For both the three months ended March 31, 2026 and 2025, there were no loans modified to borrowers experiencing financial difficulty.

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Note 5: Deposits

The following table presents the composition of deposits at March 31, 2026 and December 31, 2025:

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Brokered deposits included brokered transaction and money market accounts of $123.6 million and $145.5 million as of March 31, 2026 and December 31, 2025, respectively.

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The following table presents the scheduled maturities of brokered and time deposits at March 31, 2026:

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The aggregate amount of time deposits greater than $250,000 was approximately $81.8 million and $158.7 million at March 31, 2026 and December 31, 2025, respectively.

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Note 6: Derivative Instruments and Hedging Activities

The Company uses derivative financial instruments, which consist of interest rate swaps, interest rate caps, and fair value swaps to assist in its interest rate risk management. The notional amount does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual agreements. Derivative financial instruments are reported at fair value in other assets or other liabilities. The accounting for changes in the fair value of a derivative depends on whether it has been designated and qualifies as part of a hedging relationship and classification as either a cash flow hedge or fair value hedge for those derivatives which are designated as part of a hedging relationship. For derivatives not designated as hedges, the gain or loss is recognized in current earnings.

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Derivatives Designated as Hedging Instruments

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The Company uses derivative instruments to hedge its exposure to economic risks, including interest rate, liquidity and credit risk. Certain hedging relationships are formally designated and qualify for hedge accounting under GAAP. On the date the Company enters into a derivative contract designated as a hedging instrument, the derivative is designated as either a fair value hedge or a cash flow hedge. When a derivative is designated as a fair value or cash flow hedge, the Company performs an assessment, at inception, and at a minimum, quarterly thereafter, to determine the effectiveness of the derivative in offsetting changes in the value or cash flows of the hedged item(s).

Fair value hedges: For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument, as well as the offsetting gain or loss on the hedged asset or liability attributable to the hedged risk, are recognized in current earnings. The gain or loss on the derivative instrument is presented on the same income statement line item as the earnings effect of the hedged item. The Company utilizes fair value hedges to mitigate the effect of changing interest rates on the fair values of fixed rate available for sale securities. The hedging strategy converts the fixed interest rates to variable interest rates based on Secured Overnight Financing Rate (“SOFR”).

As of March 31, 2026, the Company terminated certain fair value interest rate swaps with an aggregate notional amount of $195.9 million, resulting in a net gain of $10.4 million. The net gain was recognized in earnings and included in net gains on sales of available for sale securities.

The following table presents a summary of the Company’s interest rate swaps designated as fair value hedges as of March 31, 2026 and December 31, 2025:

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Cash flow hedges: For derivative instruments that are designated and qualify as a cash flow hedge, the aggregate fair value of the derivative instrument is recorded in other assets or other liabilities, with any gain or loss related to changes in fair value recorded in accumulated other comprehensive income, net of tax. The gain or loss is reclassified into earnings in the same period during which the hedged asset or liability affects earnings and is presented in the same income statement line item as the earnings effect of the hedged asset or liability. The Company utilizes cash flow hedges to manage interest rate exposure for the brokered deposit and wholesale borrowing portfolios. During the next 12 months, the Company estimates that $4.2 million will be reclassified to interest expense, as a reduction of the expense.

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The following table presents a summary of the Company’s interest rate swaps designated as cash flow hedges as of March 31, 2026 and December 31, 2025:

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The Company purchases interest rate caps, designated as cash flow hedges, of certain funding liabilities. The interest rate caps require receipt of variable amounts from the counterparties when interest rates rise above the strike price specified in the contracts. For both the three months ended March 31, 2026 and 2025, the Company recognized amortization expense on the interest rate caps of $196,000, which was recorded as a component of interest expense on brokered deposits and FHLB advances.

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The following table presents a summary of the Company’s interest rate caps designated as cash flow hedges as of March 31, 2026 and December 31, 2025:

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Derivatives Not Designated as Hedging Instruments

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Interest rate swaps: The Company enters into interest rate swaps to facilitate client transactions and meet their financing needs. Upon entering into these instruments, the Company enters into offsetting positions with large U.S. financial institutions in order to minimize risk to the Company. These swaps are derivatives, but are not designated as hedging instruments. Interest rate swap contracts involve the risk of dealing with counterparties and their ability to meet contractual terms. When the fair value of a derivative instrument contract is positive, this generally indicates that the counterparty or client owes the Company, and results in credit risk to the Company. When the fair value of a derivative instrument contract is negative, the Company owes the client or counterparty and therefore, the Company has no associated credit risk.

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Risk participation agreements (“RPA”): The Company has entered into RPAs to share credit exposure with a counterparty in connection with interest rate swaps associated with loan participations. Under an RPA, the Company either assumes or sells a portion of the underlying credit exposure and, in exchange, pays or receives an upfront fee. When the Company assumes credit exposure, it is entitled to receive payment from the counterparty in the event of a borrower default. Conversely, when the Company sells credit exposure, it is obligated to make a payment to the counterparty if the underlying borrower defaults on its obligations. The notional amount of the RPA reflects the Company’s pro-rata share of the derivative instrument consistent with its share of the related participated loan.

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The following table presents the total notional amounts and gross fair values of the Company’s derivatives as of March 31, 2026 and December 31, 2025:

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The Company is party to collateral support agreements with certain derivative counterparties. These agreements require the Company to maintain collateral based on the fair values of derivative transactions. In the event of default by the Company, the counterparty would be entitled to the collateral. As of both March 31, 2026 and December 31, 2025, the Company had pledged no cash collateral for its derivative contracts. As of March 31, 2026 and December 31, 2025, the Company’s counterparties had pledged cash collateral to the Company of $20.0 million and $26.2 million, respectively.

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The following table presents the effect of derivative instruments in cash flow hedging relationships on the consolidated statements of income for the three months ended March 31, 2026 and 2025:

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No amounts were reclassified from accumulated other comprehensive income into net income related to hedge ineffectiveness for these derivatives during the three months ended March 31, 2026 or 2025, and no amounts are expected to be reclassified from accumulated other comprehensive income into net income related to hedge ineffectiveness over the next twelve months.

The effects of the Company’s hedging relationships on the income statement during the three months ended March 31, 2026 and 2025 are presented in the table below:

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The following table presents amounts that were recorded on the balance sheet related to cumulative basis adjustments for fair value hedges at March 31, 2026 and December 31, 2025:

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The gain recognized on derivatives not designated as hedging relationships for the three months ended March 31, 2026 and 2025 was as follows:

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The following table summarizes gross and net information about derivative instruments that were eligible for offset on the balance sheet at March 31, 2026 and December 31, 2025:

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Note 7: Federal Home Loan Bank Advances and Other Borrowings

Federal Home Loan Bank Advances. The Company has entered into an Advances, Pledge, and Security Agreement with the FHLB whereby specific mortgage loans of the Bank with aggregate principal balances of $1.68 billion and $1.62 billion at March 31, 2026 and December 31, 2025, respectively, were pledged to the FHLB as collateral. FHLB advances are also secured with FHLB stock owned by the Company. Total remaining available capacity under the agreement was $784.9 million and $611.3 million at March 31, 2026 and December 31, 2025, respectively.

The following table presents information regarding FHLB advances, by maturity, at March 31, 2026 and December 31, 2025:

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Line of Credit. The Company has a Loan and Security Agreement and related revolving note with an unaffiliated financial institution that is secured by 100% of the issued and outstanding stock of the Bank. The maximum principal amount of the Company’s revolving line of credit is $40 million. As of March 31, 2026 and December 31, 2025, the Company had two outstanding letters of credit totaling $2.7 million and $6.4 million, respectively, under this facility. The note contains customary representations, warranties, and covenants, including certain financial covenants and capital ratio requirements. The Company believes it was in compliance with all covenants as of March 31, 2026 and December 31, 2025.

The following table presents information regarding the revolving line of credit at March 31, 2026 and December 31, 2025:

(1) The variable interest rate is equal to the greater of Wall Street Journal Prime Rate in effect or a floor of 4.50%.

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Note 8: Commitments, Contingencies and Credit Risk

Financial Instruments with Off-Balance Sheet Credit Risk

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets.

The Company’s exposure to credit loss is represented by the contractual, or notional, amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance sheet instruments. Since some of the commitments are expected to expire without being drawn upon and some of the commitments may not be drawn upon to the total extent of the commitment, the notional amount of these commitments does not necessarily represent future cash requirements.

The following table presents information regarding commitments outstanding at March 31, 2026 and December 31, 2025:

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The Company had outstanding letters of credit with the FHLB of $39.1 million and $109.0 million at March 31, 2026 and December 31, 2025, respectively, on behalf of customers and to secure public deposits.

The ACL for off-balance sheet credit exposures was $3.9 million and $4.0 million at March 31, 2026 and December 31, 2025, respectively, and is separately classified on the balance sheet within other liabilities.

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The following table presents the balance and activity in the ACL for off-balance sheet credit exposures for the three months ended March 31, 2026 and 2025:

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Legal Contingencies

Neither the Company nor any of its subsidiaries is a party, and no property of these entities is subject, to any material pending legal proceedings, other than ordinary routine litigation incidental to the Bank’s business. The Company does not know of any material proceeding contemplated by a governmental authority against the Company or any of its subsidiaries.

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Note 9: Stock Options and Restricted Stock

In 2012, the Company adopted the Bridgewater Bancshares, Inc. 2012 Combined Incentive and Non-Statutory Stock Option Plan (the “2012 Plan”) under which the Company was able to grant options to its directors, officers, and employees for up to 750,000 shares of common stock. Both incentive stock options and nonqualified stock options were granted under the 2012 Plan. The exercise price of each option equals the fair market value of the Company’s stock on the date of grant, and the maximum term of each outstanding option is ten years. All outstanding options have been granted with vesting periods of four or five years. The 2012 Plan expired in March 2022, and awards are no longer able to be granted under the 2012 Plan.

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In 2017, the Company adopted the Bridgewater Bancshares, Inc. 2017 Combined Incentive and Non-Statutory Stock Option Plan (the “2017 Plan”). Under the 2017 Plan, the Company may grant options to its directors, officers, employees and consultants for up to 1,500,000 shares of common stock. Both incentive stock options and nonqualified stock options may be granted under the 2017 Plan. The exercise price of each option equals the fair market value of the Company’s stock on the date of grant and the maximum term of each outstanding option is ten years. All outstanding options have been granted with vesting periods of four or five years. As of both March 31, 2026 and December 31, 2025, there were 10,000 shares of the Company’s common stock reserved for future option grants under the 2017 Plan.

In 2019, the Company adopted the Bridgewater Bancshares, Inc. 2019 Equity Incentive Plan (the “2019 EIP”). The types of awards which may be granted under the 2019 EIP include incentive and nonqualified stock options, stock appreciation rights, stock awards, restricted stock units, restricted stock and cash incentive awards. The Company may grant these awards to its directors, officers, employees and certain other service providers for up to 1,000,000 shares of common stock. The exercise price of each option equals the fair market value of the Company’s stock on the date of grant and the maximum term of each award is ten years. All outstanding awards have been granted with a vesting period of four years. As of March 31, 2026 and December 31, 2025, there were 2,225 and 2,192 shares, respectively, of the Company’s common stock reserved for future grants under the 2019 EIP.

In 2023, the Company adopted the Bridgewater Bancshares, Inc. 2023 Equity Incentive Plan (the “2023 EIP”). Under the 2023 EIP, the Company may grant incentive and nonqualified stock options, stock appreciation rights, stock awards, restricted stock units, restricted stock and cash incentive awards. The Company may grant these awards to its directors, officers, employees and certain other service providers for up to 1,500,000 shares of common stock. The exercise price of each option equals the fair market value of the Company’s stock on the date of grant and the maximum term of each award is ten years. All outstanding awards have been granted with a vesting period of four years. As of March 31, 2026 and December 31, 2025, there were 368,418 and 464,751 shares, respectively, of the Company’s common stock reserved for future grants under the 2023 EIP.

Stock Options

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected volatilities are based on an industry index as described below. The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding, which takes into account the fact that the options

are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Historically, the Company has not paid a dividend on its common stock and does not expect to do so in the near future

The Company used the S&P 600 CM Bank Index as its historical volatility index. The S&P 600 CM Bank Index is an index of publicly traded small capitalization, regional, commercial banks located throughout the United States. There were 56 banks in the index ranging in market capitalization from $600.0 million up to $5.0 billion.

The weighted average assumptions used in the model for valuing stock options grants for the three months ended March 31, 2026 are as follows:

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The following table presents a summary of the status of the Company’s outstanding stock options for the three months ended March 31, 2026:

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March 31, 2026

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For the three months ended March 31, 2026 and 2025, the Company recognized compensation expense for stock options of $283,000 and $265,000, respectively.

The following table presents information pertaining to options outstanding at March 31, 2026:

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As of March 31, 2026, there was $2.4 million of total unrecognized compensation cost related to nonvested stock options that is expected to be recognized over a weighted-average period of 2.4 years.

The following table presents an analysis of nonvested options to purchase shares of the Company’s stock issued and outstanding for the three months ended March 31, 2026:

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Restricted Stock Units

The Company has granted restricted stock units out of the 2019 EIP and 2023 EIP. Restricted stock units represent the right to receive one share of Company stock upon vesting and vest in equal annual installments on the first four anniversaries of the date of the grant. Nonvested restricted stock units have no voting or dividend rights and are not considered outstanding until vested and settled.

The following table presents an analysis of nonvested restricted stock units outstanding for the three months ended March 31, 2026:

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Compensation expense associated with the restricted stock units is recognized on a straight-line basis over the period that the restrictions associated with the units lapse based on the total cost of the unit at the grant date. For the three months ended March 31, 2026 and 2025, the Company recognized compensation expense associated with restricted stock units of $841,000 and $603,000, respectively.

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As of March 31, 2026, there was $6.4 million of total unrecognized compensation cost related to nonvested restricted stock units granted under the 2019 EIP and 2023 EIP that is expected to be recognized over a weighted-average period of 2.8 years.

Restricted Stock Awards

During the three months ended March 31, 2026, the Company issued 8,302 shares of unrestricted common stock to non-employee directors, as a part of their compensation for their annual services on the Company’s board of directors. The aggregate value of the shares issued to non-employee directors of $147,000 was included in stock based compensation expense in the accompanying consolidated statements of shareholders’ equity.

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Note 10: Regulatory Capital

The Company and the Bank are subject to various regulatory requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank must also meet certain specific capital guidelines under the regulatory framework for prompt corrective action. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain minimum amounts and ratios of common equity Tier 1 capital, Tier 1 capital and total capital to risk-weighted assets and of Tier 1 capital to average consolidated assets (referred to as the “leverage ratio”), as defined under the applicable regulatory capital rules.

The following tables present the capital amounts and ratios for the Company, on a consolidated basis, and the Bank as of March 31, 2026 and December 31, 2025:

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The Company and the Bank must maintain a capital conservation buffer, as defined by regulatory guidelines, in order to avoid limitations on capital distributions, including dividend payments, stock repurchases and certain discretionary bonus payments to executive officers.

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Note 11: Fair Value Measurement

The Company categorizes its assets and liabilities measured at fair value into a three-level hierarchy based on the priority of the inputs to the valuation technique used to determine fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used in the determination of the fair value measurement fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement. Assets and liabilities valued at fair value are categorized based on the inputs to the valuation techniques as follows:

Level 1 – Inputs that utilized quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access.

Level 2 – Inputs that include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instruments. Fair values for these instruments are estimated using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows.

Level 3 – Inputs that are unobservable for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity.

Subsequent to initial recognition, the Company may re-measure the carrying value of assets and liabilities measured on a nonrecurring basis to fair value. Adjustments to fair value usually result when certain assets are impaired. Such assets are written down from their carrying amounts to their fair value.

Professional standards allow entities the irrevocable option to elect to measure certain financial instruments and other items at fair value for the initial and subsequent measurement on an instrument-by-instrument basis. The Company adopted the policy to value certain financial instruments at fair value. The Company has not elected to measure any existing financial instruments at fair value; however, it may elect to measure newly acquired financial instruments at fair value in the future.

Recurring Basis

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. There have been no changes in methodologies used as of March 31, 2026. The following tables present the balances of assets and liabilities measured at fair value on a recurring basis as of March 31, 2026 and December 31, 2025:

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March 31, 2026

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December 31, 2025

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Investment Securities

When available, the Company uses quoted market prices to determine the fair value of investment securities; such items are classified in Level 1 of the fair value hierarchy.

For the Company’s investments, when quoted prices are not available for identical securities in an active market, the Company determines fair value utilizing vendors who apply matrix pricing for similar bonds where no price is observable or may compile prices from various sources. These models are primarily industry-standard models that consider various assumptions, including time value, yield curve, volatility factors, prepayment speeds, default rates, loss severity, current market, and contractual prices for the underlying financial instruments, as well as other relevant economic measures. Substantially, all of these assumptions are observable in the marketplace and can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Fair values from these models are verified, where possible, against quoted market prices for recent trading activity of assets with similar characteristics to the security being valued. Such methods are generally classified as Level 2. However, when prices from independent sources vary, or cannot be obtained or corroborated, a security is generally classified as Level 3.

Fair Value Swaps

Fair value swaps are traded in over-the-counter markets where quoted market prices are not readily available. For such fair value swaps, fair value is determined using internally developed models of a third party that uses primarily market observable inputs, such as yield curves and option volatilities, and accordingly are valued using Level 2 inputs.

Interest Rate Caps

The fair value of the caps is calculated by determining the total expected asset or liability exposure of the derivatives. Total expected exposure incorporates both the current and potential future exposure of the derivative, derived from using observable inputs, such as yield curves and volatilities, and accordingly are valued using Level 2 inputs.

Interest Rate Swaps

Interest rate swaps are traded in over-the-counter markets where quoted market prices are not readily available. For those interest rate swaps, fair value is determined using internally developed models of a third party that uses primarily market observable inputs, such as yield curves and option volatilities, and accordingly are valued using Level 2 inputs.

Risk Participation Agreements

The fair value of risk participation agreements is calculated by determining the total expected asset or liability exposure using observable inputs, such as yield curves and volatilities, of the derivative to the borrower and applying an unobservable credit default probability to that exposure, and accordingly are valued using level 3 inputs.

Nonrecurring Basis

Certain assets are measured at fair value on a nonrecurring basis. These assets are not measured at fair value on an ongoing basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment or a change in the amount of previously recognized impairment.

The following tables present net credit losses related to nonrecurring fair value measurements of certain assets at March 31, 2026 and December 31, 2025:

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March 31, 2026

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December 31, 2025

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Individually Evaluated Loans

The Company records certain loans at fair value on a non-recurring basis. Individually evaluated loans for which an allowance is established, or a write-down has occurred during the period, based on the fair value of collateral require classification in the fair value hierarchy. The fair value of the loan’s collateral is determined by appraisals, independent valuation and other techniques. When the fair value of the loan’s collateral is based on an observable market price the Company classifies the fair value of the individually evaluated loans within Level 2 of the valuation hierarchy. For loans in which the valuation has unobservable inputs, the Company classifies these within the Level 3 of the valuation hierarchy. As of March 31, 2026, collateral values were estimated using a combination of observable inputs, including recent appraisals, and unobservable inputs, including internally determined values based on cost adjusted for depreciation and customized discounting criteria on appraisals. Due to the significance of unobservable inputs, fair values of individually evaluated loans have been classified as Level 3.

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The valuation techniques and significant unobservable inputs used to measure Level 3 estimated fair value as of March 31, 2026 and December 31, 2025 were as follows:

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Fair Value

Disclosure of fair value information about financial instruments, for which it is practicable to estimate that value, is required whether or not recognized in the consolidated balance sheets. In cases where quoted market prices are not available, fair values are based on estimates using present value of cash flow or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimate of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases could not be realized in immediate settlement of the instruments. Certain financial instruments with a fair value that is not practicable to estimate and all non-financial instruments are excluded from the disclosure requirements. Accordingly, the aggregate fair value amounts presented do not necessarily represent the underlying value of the Company.

Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters that could affect the estimates. Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business. Deposits with no stated maturities are defined as having a fair value equivalent to the amount payable on demand. This prohibits adjusting fair value derived from retaining those deposits for an expected future period of time. This component, commonly referred to as a deposit base intangible, is neither considered in the above amounts nor is it recorded as an intangible asset on the balance sheet. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

The following tables present the carrying amounts and estimated fair values of financial instruments at March 31, 2026 and December 31, 2025:

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March 31, 2026

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December 31, 2025

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The following methods and assumptions were used by the Company to estimate fair value of financial instruments not previously discussed.

Cash and due from banks – The carrying amount of cash and cash equivalents approximates their fair value.

Bank-owned certificates of deposit – Fair values of bank-owned certificates of deposit are estimated using the discounted cash flow analysis based on current rates for similar types of deposits.

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FHLB stock – The carrying amount of FHLB stock approximates its fair value.

Loans, net – Fair values for loans are estimated based on discounted cash flows, using interest rates currently being offered for loans with similar terms to borrowers with similar credit quality.

Accrued interest receivable – The carrying amount of accrued interest receivable approximates its fair value since it is short term in nature and does not present anticipated credit concerns.

Deposits – The fair values disclosed for demand deposits without stated maturities (interest and noninterest transaction, savings, and money market accounts) are equal to the amount payable on demand at the reporting date (their carrying amounts). Fair values for the fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Notes payable and subordinated debentures – The fair values of the Company’s notes payable and subordinated debentures are estimated using a discounted cash flow analysis, based on the Company’s current incremental borrowing rate for similar types of borrowing arrangements.

FHLB advances – The fair values of the Company’s FHLB advances are estimated using discounted cash flow analysis based on the Company’s current incremental borrowing rates for similar types of borrowing agreements.

Accrued interest payable – The carrying amount of accrued interest payable approximates its fair value since it is short term in nature.

Off-balance sheet instruments – Fair values of the Company’s off-balance sheet instruments (lending commitments and unused lines of credit) are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements, the counterparties’ credit standing and discounted cash flow analysis. The fair value of these off-balance sheet items approximates the recorded amounts of the related fees and was not material at March 31, 2026 and December 31, 2025.

Limitations – The fair value of a financial instrument is the current amount that would be exchanged between market participants, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Consequently, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

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Note 12: Accumulated Other Comprehensive Income

The following table presents the components of other comprehensive income for the three months ended March 31, 2026 and 2025:

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The following table presents the changes in each component of accumulated other comprehensive income, net of tax, for the three months ended March 31, 2026 and 2025:

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Note 13: Subsequent Events

On April 21, 2026, the Company’s Board of Directors announced a quarterly cash dividend of $36.72 per share ($0.3672 per depositary share) on its 5.875% Non-Cumulative Perpetual Preferred Stock, Series A (“Series A Preferred Stock”), payable on June 1, 2026, to shareholders of record on the Series A Preferred Stock at the close of business on May 15, 2026.

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On April 28, 2026, the Company’s shareholders approved the Bridgewater Bancshares, Inc. 2026 Equity Incentive Plan (the “2026 Plan”). Under the 2026 Plan, the Company may issue various types of equity awards including, but not limited to, incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock and stock-based awards, as well as cash-based awards to its directors, officers, and employees for up to 1,500,000 shares of common stock. There are currently no awards outstanding under the 2026 Plan.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

The following discussion explains the Company’s financial condition and results of operations as of and for the three months ended March 31, 2026. Annualized results for these interim periods may not be indicative of results for the full year or future periods. The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes presented elsewhere in this report and the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission, or the SEC, on February 26, 2026.

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Overview

The Company is a financial holding company headquartered in St. Louis Park, Minnesota. The principal sources of funds for loans and investments are transaction, savings, time, and brokered deposits, and short-term and long-term borrowings. The Company’s principal sources of income are interest and fees collected on loans, interest and dividends earned on investment securities and noninterest income, including service charges, letter of credit fees, and swap fees. The Company’s principal expenses are interest paid on deposit accounts and borrowings, employee compensation and other overhead expenses. The Company’s simple, highly efficient business model of providing responsive support and simple solutions to clients continues to be the underlying principle that drives the Company’s profitable growth.

Critical Accounting Policies and Estimates

The consolidated financial statements of the Company are prepared based on the application of certain accounting policies, the most significant of which are described in “Note 1 – Description of the Business and Summary of Significant Accounting Policies” of the notes to the consolidated financial statements included as a part of the Company’s most recent Annual Report on Form 10-K, filed with the SEC on February 26, 2026. There have been no significant changes in the critical accounting policies or the assumptions and judgments utilized in applying these policies since December 31, 2025. Certain policies require numerous estimates and strategic or economic assumptions that may prove inaccurate or subject to variation and may significantly affect the reported results and financial position for the current period or in future periods. Changes in underlying factors, assumptions or estimates in any of these areas could have a material impact on the future financial condition and results of operations. Management has discussed each critical accounting policy and the methodology for the identification and determination of critical accounting policies with the Company’s Audit Committee.

Recent Developments

In February 2026, the Company opened a new branch location in Lake Elmo, Minnesota to expand the Company’s presence in the eastern side of the Twin Cities market.

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On February 27, 2026, the Company and the Bank entered into an equity distribution agreement with Piper Sandler & Co., as distribution agent, pursuant to which the Company may offer and sell, from time to time, shares of its common stock with an aggregate gross sales price of up to $50.0 million, including through “at-the-market” offerings and other permitted methods. The distribution agent is entitled to a commission of 2.5% of the gross sales price of the common stock sold in such offering. The Company is not obligated to sell any shares of its common stock pursuant to

the equity distribution agreement, and may suspend or terminate sales thereunder at any time. Any shares sold will be issued pursuant to the Company’s effective shelf registration statement on Form S-3 and related prospectus supplement, and net proceeds, if any, are expected to be used for general corporate purposes, including investments in or advances to the Company’s subsidiaries, working capital, capital expenditures, stock repurchases, debt repayment, or potential acquisitions.

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Operating Results Overview

The following table summarizes certain key financial results as of and for the periods indicated:

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(1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details.

(2) Annualized.

(3) Amounts calculated on a tax-equivalent basis using the statutory federal tax rate of 21%.

(4) Core deposits are defined as total deposits less brokered deposits and certificates of deposit greater than $250,000.

(5) Preliminary data. Current period subject to change prior to filing with applicable regulatory filings.

(6) Nonperforming assets are defined as nonaccrual loans plus 90 days past due plus foreclosed assets.

Discussion and Analysis of Results of Operations

Net Income

Net income was $17.4 million for the first quarter of 2026, compared to net income of $9.6 million for the first quarter of 2025. Earnings per diluted common share for the first quarter of 2026 were $0.58, compared to $0.31 per diluted common share for the first quarter of 2025. Adjusted net income, a non-GAAP financial measure, was $12.6 million for the first quarter of 2026, compared to $10.1 million for the first quarter of 2025. Adjusted earnings per diluted common share, a non-GAAP financial measure, for the first quarter of 2026 were $0.41, compared to $0.32 per diluted common share for the first quarter of 2025.

Net Interest Income

The Company’s primary source of revenue is net interest income, which is impacted by the level of interest earning assets and related funding sources, as well as changes in interest rates. The difference between the average yield on earning assets and the average rate paid for interest bearing liabilities is the net interest spread. Noninterest bearing sources of funds, such as demand deposits and shareholders’ equity, also support earning assets. The impact of the noninterest bearing sources of funds is captured in the net interest margin, which is calculated as net interest income divided by average earning assets. Both the net interest margin and net interest spread are presented on a tax-equivalent basis, which means that tax-free interest income has been adjusted to pretax-equivalent income, assuming a 21% federal tax rate. Management’s ability to respond to changes in interest rates by using effective asset-liability management techniques is critical to managing net interest margin and the Company’s primary source of earnings.

Average Balances and Yields

The following table presents, for the three months ended March 31, 2026 and 2025, the average balances of each principal category of assets, liabilities and shareholders’ equity, and an analysis of net interest income. The average balances are principally daily averages and, for loans, include both performing and nonperforming balances. Interest income on loans includes the effects of net deferred loan origination fees and costs accounted for as yield adjustments. These tables are presented on a tax-equivalent basis, if applicable.

(1) Interest income and average rates for tax-exempt investment securities and loans are presented on a tax-equivalent basis, assuming a federal income tax rate of 21%.

(2) Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs.

(3) Net interest margin includes the tax equivalent adjustment and represents the annualized results of: (i) the difference between interest income on interest earning assets and the interest expense on interest bearing liabilities, divided by (ii) average interest earning assets for the period.

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Interest Rates and Operating Interest Differential

Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest earning assets and interest bearing liabilities, as well as changes in average interest rates. The following table presents the effect that these factors had on the interest earned on interest earning assets and the interest incurred on interest bearing liabilities. The effect of changes in volume is determined by multiplying the change in volume by the previous period’s average rate. Similarly, the effect of rate changes is calculated by multiplying the change in average rate by the previous period’s volume. The changes not attributable specifically to either volume or rate have been allocated to the changes due to volume. The following table presents the changes in the volume and rate of interest bearing assets and liabilities for the three months ended March 31, 2026, compared to the three months ended March 31, 2025:

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Comparison of Net Interest Margin, Interest Income, and Interest Expense

Net interest income was $36.6 million for the first quarter of 2026, an increase of $6.4 million compared to net interest income of $30.2 million for the first quarter of 2025. The increase in net interest income was primarily due to lower rates paid on deposits, lower FHLB advance balances at lower yields, and growth in the loan portfolio, offset partially by lower cash and investment securities balances.

Net interest margin (on a fully tax-equivalent basis), a non-GAAP financial measure, for the first quarter of 2026 was 2.99%, a 48 basis point increase from 2.51% in the first quarter of 2025. Core net interest margin (on a fully tax-equivalent basis), a non-GAAP financial measure which excludes the impact of loan fees and purchase accounting accretion attributable to the acquisition of FMCB, was 2.86% for the first quarter of 2026, a 49 basis point increase from 2.37% in the first quarter of 2025. The increase in net interest margin (on a fully tax-equivalent basis) was

primarily due to lower rates paid on deposits, growth in the loan portfolio at higher yields, and a decrease in average earning assets due to investment securities sales, offset partially by lower cash and investment securities balances.

Average interest earning assets were $5.08 billion for the first quarter of 2026, an increase of $151.1 million, or 3.1%, compared to $4.93 billion for the first quarter of 2025. The increase in average interest earning assets was primarily due to growth in the loan portfolio, offset partially by lower cash and investment securities balances. Average interest bearing liabilities were $3.83 billion for the first quarter of 2026, an increase of $56.4 million, or 1.5%, compared to $3.77 billion for the first quarter of 2025. The increase in average interest bearing liabilities was primarily due to higher deposit balances, federal funds purchased, and subordinated debentures, offset partially by a decrease in FHLB advances and notes payable.

Average interest earning assets produced a tax-equivalent yield of 5.65% for the first quarter of 2026, compared to 5.43% for the first quarter of 2025. The increase in the yield on interest earning assets was primarily due to growth and repricing of the loan portfolio at accretive yields. The average rate paid on interest bearing liabilities was 3.53% for the first quarter of 2026, compared to 3.82% for the first quarter of 2025. The decrease was primarily due to lower rates paid on deposits, offset partially by higher balances and rates paid on subordinated debentures and higher rates paid on FHLB advances.

Interest Income. Total interest income, on a tax-equivalent basis, was $70.7 million for the first quarter of 2026, compared to $66.0 million for the first quarter of 2025. The $4.7 million, or 7.2%, increase in total interest income, on a tax-equivalent basis, was primarily due to growth and repricing of the loan portfolio.

Interest income on the investment securities portfolio, on a tax-equivalent basis, decreased $2.2 million for the first quarter of 2026, compared to the first quarter of 2025, primarily due to a $178.4 million, or 22.2%, decrease in average balances between the two periods. The decrease in securities was due to the Company selling $208.5 million of securites for a pre-tax gain of $7.3 million.

Interest income on loans, on a tax-equivalent basis, was $62.1 million for the first quarter of 2026, compared to $54.0 million for the first quarter of 2025. The $8.1 million, or 15.0%, increase was primarily due to growth and repricing of the loan portfolio.

The aggregate loan yield, on a tax-equivalent basis, was 5.81% in the first quarter of 2026, a 20 basis point increase, compared to 5.61% in the first quarter of 2025. Core loan yield, a non-GAAP financial measure, continued to rise as new loans originated at higher yields and the existing portfolio repriced in the higher interest rate environment.

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The following table presents a summary of interest, fees and accretion recognized on loans for the periods indicated:

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Interest Expense. Interest expense was $33.3 million for the first quarter of 2026, a decrease of $2.2 million, or 6.1%, from $35.5 million for the first quarter of 2025. The decrease was primarily due to lower rates paid on deposits, offset partially by higher balances and rates paid on subordinated debentures and higher rates on FHLB advances.

Interest expense on deposits was $28.8 million for the first quarter of 2026, a decrease of $3.3 million, or 10.3%, from $32.1 million for the first quarter of 2025. The decrease in interest expense on deposits was primarily due

to lower rates paid on deposits and lower average balance in time deposits and brokered deposits. The cost of total deposits was 2.79% in the first quarter of 2026, a 39 basis point decrease, compared to 3.18% in the first quarter of 2025. The decrease was primarily due to lower rates paid on deposits following interest rate cuts in 2025, lower average brokered deposit balances, and an increase in noninterest bearing deposits.

Interest expense on borrowings was $4.5 million for the first quarter of 2026, an increase of $1.1 million, compared to $3.4 million for the first quarter of 2025. The increase was primarily due to higher balances and rates on subordinated debentures due to the subordinated debt refinance in the second quarter of 2025 and higher rates paid on FHLB advances.

Provision for Credit Losses

The provision for credit losses on loans and leases was $1.4 million for the first quarter of 2026, compared to $1.5 million for the first quarter of 2025. The provision for credit losses on loans and leases recorded in the first quarter of 2026 was primarily attributable to growth in the loan portfolio. The allowance for credit losses on loans and leases to total loans was 1.31% at March 31, 2026, compared to 1.34% at March 31, 2025.

The following table presents a summary of the activity in the allowance for credit losses on loans and leases for the periods indicated:

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The provision for credit losses for off-balance sheet credit exposures was a negative provision of $150,000 for the first quarter of 2026, compared to a provision of $-0- for the first quarter of 2025. A negative provision was recorded during the first quarter of 2026 due to a decrease in unfunded commitments. The allowance for credit losses on off-balance sheet credit exposures was $3.9 million as of March 31, 2026, compared to $4.0 million as of December 31, 2025.

The following table presents a summary of the activity in the provision for credit losses for the periods indicated:

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Noninterest Income

Noninterest income was $9.6 million for the first quarter of 2026, an increase of $7.5 million from $2.1 million for the first quarter of 2025. The increase was primarily due to higher net gains on the sale of securities, swap fees and other income, offset partially by lower letter of credit fees and investment advisory fees.

The following table presents the major components of noninterest income for the periods indicated:

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Noninterest Expense

Noninterest expense was $22.2 million for the first quarter of 2026, an increase of $4.0 million from $18.1 million for the first quarter of 2025. The increase was primarily attributable to increases in salaries and employee benefits, an FHLB advance prepayment penalty, and marketing and advertising expense.

The Company had 337 full-time equivalent employees at the end of the first quarter of 2026, compared to 292 at the end of the first quarter of 2025. The increase was largely driven by the hiring of key talent across the organization.

Efficiency Ratio. The efficiency ratio (on a fully tax-equivalent basis), a non-GAAP financial measure, reports total noninterest expense, less amortization of intangible assets, as a percentage of net interest income plus total noninterest income, less gains (losses) on sales of securities. Management believes this non-GAAP financial measure provides a meaningful comparison of operational performance and facilitates investors’ assessments of business performance and trends in comparison to peers in the banking industry.

The efficiency ratio (on a fully tax-equivalent basis) was 56.3% for the first quarter of 2026, compared to 55.5% for the first quarter of 2025. The Company’s efficiency ratio has remained consistently below the industry median due in part to its “branch-light” model.

The following table presents the major components of noninterest expense for the periods indicated:

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Income Tax Expense

The provision for income taxes includes both federal and state taxes. Fluctuations in effective tax rates reflect the differences in the inclusion or deductibility of certain income and expenses for income tax purposes and the recognition of tax credits. The Company’s future effective income tax rate will fluctuate based on the mix of taxable and tax-free investments and loans, the recognition and availability of tax credit investments, and overall taxable income.

Income tax expense was $5.4 million for the first quarter of 2026, compared to $3.0 million for the first quarter of 2025. The effective combined federal and state income tax rate for the first quarter of 2026 was 23.8%, compared to 23.9% for the first quarter of 2025.

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Financial Condition

Assets

Total assets at March 31, 2026 were $5.34 billion, a decrease of $71.6 million, or 1.3%, compared to total assets of $5.41 billion at December 31, 2025, and an increase of $198.6 million, or 3.9%, compared to total assets of $5.14 billion at March 31, 2025. The year-to-date decrease was primarily due to the sale of investment securities and pre-payment of FHLB advances. The Company sold $208.5 million of securities in the first quarter of 2026 to enhance balance sheet efficiency and drive current and future earnings. The year-over-year increase was primarily due to growth in the loan portfolio, offset partially by the sale of investment securities.

Investment Securities Portfolio

The investment securities portfolio is used to make various term investments and is intended to provide the Company with adequate liquidity, a source of stable income, and at times, serve as collateral for certain types of deposits or borrowings. Investment balances in the investment securities portfolio are subject to change over time based on funding needs and interest rate risk management objectives. The liquidity levels take into account anticipated future cash flows and are maintained at levels management believes are appropriate to ensure future flexibility in meeting anticipated funding needs. All investment securities are held available for sale.

Securities available for sale were $566.6 million at March 31, 2026, a decrease of $209.9 million, or 27.0%, compared to $776.4 million at December 31, 2025. The decrease was primarily due to the sale of investment securities. The sales of securities was a strategic move taken to enhance the Company’s balance sheet efficiency and positioning the Company for improved profitability moving forward.

The following table presents the amortized cost and fair value of securities available for sale, by type, at March 31, 2026 and December 31, 2025:

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Loan Portfolio

The Company focuses on lending to borrowers located or investing in the Twin Cities MSA across a diverse range of industries and property types. The Company lends primarily to commercial clients, consisting of loans secured by nonfarm, nonresidential properties, multifamily residential properties, land, and non-real estate business assets. Responsive service, local decision making, and an efficient turnaround time from application to closing have been significant factors in growing the loan portfolio.

The Company manages concentrations of credit exposure through a risk management program which implements formalized processes and procedures specifically for managing and mitigating risk within the loan portfolio. The processes and procedures include oversight by the board of directors and management, commercial real estate exposure limits, portfolio monitoring tools, management information systems, market reports, underwriting standards, internal and external loan review, and stress testing.

Total gross loans at March 31, 2026 were $4.37 billion, an increase of $58.5 million, or 5.5% annualized, over total gross loans of $4.31 billion at December 31, 2025, and an increase of $348.0 million, or 8.7%, over total gross loans of $4.02 billion at March 31, 2025. Both the year-to-date and the year-over-year increases in the loan portfolio were primarily due to increased loan originations and more favorable market conditions.

The following table presents the dollar and percentage composition of the loan portfolio by category, at the dates indicated:

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The Company primarily focuses on real estate mortgage lending, which constituted 79.0% of the portfolio at March 31, 2026. The composition of the portfolio has remained relatively consistent with prior periods, and the Company does not expect any significant changes in the composition of the loan portfolio or the emphasis on real estate lending in the foreseeable future.

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As of March 31, 2026, investor CRE loans totaled $3.04 billion, consisting of $1.59 billion of loans secured by multifamily residential properties, $1.19 billion of loans secured by nonowner occupied CRE, $209.4 million of construction and land development loans, and $50.6 million of 1-4 family construction loans. Investor CRE loans represented 69.5% of the total gross loan portfolio and 461.5% of the Bank’s total risk-based capital at March 31, 2026, compared to 69.9% and 473.1%, respectively, at December 31, 2025.

The following table provides a breakdown of CRE nonowner occupied loans by collateral types as of March 31, 2026 and December 31, 2025:

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The following tables present time to contractual maturity and sensitivity to interest rate changes for the loan portfolio as of March 31, 2026 and December 31, 2025:

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Asset Quality

The Company emphasizes credit quality in the originating and monitoring of the loan portfolio, and success in underwriting is measured by the levels of classified and nonperforming assets and net charge-offs. Federal regulations and internal policies require the use of an asset classification system as a means of managing and reporting problem and potential problem assets. The Company has incorporated an internal asset classification system, substantially consistent with federal banking regulations, as a part of the credit monitoring system. Federal banking regulations set forth a classification scheme for problem and potential problem assets as “special mention,” “substandard,” “doubtful” or “loss” assets. An asset identified as “special mention” is not adversely classified but has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the payment prospects of the asset. An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. A financial institution with assets classified as “special mention” is not expected to sustain losses of principal or interest from these assets and should not classify assets under this category for more than a year. “Substandard” assets include those characterized by the “distinct possibility” that the financial institution will sustain “some loss” if the deficiencies are not corrected.

Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. Assets which do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are required to be designated “watch.”

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The following table presents information on loan classifications at March 31, 2026. The Company had no assets classified as doubtful or loss at March 31, 2026.

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Loans that had potential weaknesses that warranted a watch or special mention risk rating at March 31, 2026 totaled $47.7 million, compared to $47.8 million at December 31, 2025. Loans that warranted a substandard risk rating at March 31, 2026 totaled $43.1 million, compared to $53.0 million at December 31, 2025. Management continues to actively work with these borrowers and closely monitor substandard credits.

Nonperforming Assets

Nonperforming loans include loans accounted for on a nonaccrual basis and loans 90 days past due and still accruing. Nonaccrual loans totaled $11.7 million as of March 31, 2026 and $22.0 million as of December 31, 2025. There were no loans 90 days past due and still accruing as of either March 31, 2026 and December 31, 2025. There were also no foreclosed assets as of either March 31, 2026 and December 31, 2025.

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The following table presents a summary of nonperforming assets, by category, at the dates indicated:

(1) Nonperforming assets are defined as nonaccrual loans and loans greater than 90 days past due still accruing plus foreclosed assets. There were no loans greater than 90 days past due still accruing or modified accruing loans for any period shown.

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The balance of nonperforming assets can fluctuate due to changes in economic conditions. The Company has established a policy to discontinue accruing interest on a loan (that is, to place the loan on nonaccrual status) after it

has become 90 days delinquent as to payment of principal or interest, unless the loan is considered to be well-collateralized and is actively in the process of collection. In addition, a loan will be placed on nonaccrual status before it becomes 90 days delinquent unless management believes that the collection of interest is expected. Interest previously accrued but uncollected on such loans is reversed and charged against current income when the receivable is determined to be uncollectible. If management believes that a loan will not be collected in full, an increase to the allowance for credit losses on loans is recorded to reflect management’s estimate of any potential exposure or loss. Generally, payments received on nonaccrual loans are applied directly to principal. There are no loans, outside of those included in the tables above, that cause management to have serious doubts as to the ability of borrowers to comply with present repayment terms. Gross income that would have been recorded on nonaccrual loans for the three months ended March 31, 2026 and 2025 was $63,000 and $173,000, respectively.

Allowance for Credit Losses

The allowance for credit losses on loans and leases is a reserve established through charges to earnings in the form of a provision for credit losses. The Company maintains an allowance for credit losses at a level management considers adequate to provide for expected lifetime losses in the portfolio. Although management strives to maintain an allowance it deems adequate, future economic changes, deterioration of borrowers’ creditworthiness, and the impact of examinations by regulatory agencies, among other factors, all could cause changes to the allowance for credit losses on loans and leases.

At March 31, 2026, the allowance for credit losses on loans and leases was $57.3 million, an increase of $834,000 from $56.4 million at December 31, 2025. Net charge-offs totaled $516,000 during the first quarter of 2026 and $11,000 during the first quarter of 2025. The allowance for credit losses on loans and leases as a percentage of total loans was 1.31% at both March 31, 2026 and December 31, 2025.

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The following table presents a summary of net charge-offs for the periods indicated:

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The following table presents a summary of the allocation of the allowance for credit losses on loans by loan portfolio segment as of the dates indicated:

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Deposits

The principal sources of funds for the Company are deposits, consisting of demand deposits, money market accounts, savings accounts, and certificates of deposit. The following table presents the dollar and percentage composition of the deposit portfolio, by category, at the dates indicated:

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Total deposits at March 31, 2026 were $4.31 billion, a decrease of $14.9 million, or 1.4% annualized, compared to total deposits of $4.32 billion at December 31, 2025, and an increase of $143.1 million, or 3.4%, compared to total deposits of $4.16 billion at March 31, 2025. Core deposits, defined as total deposits excluding brokered deposits and time deposits greater than $250,000, increased $26.2 million, or 3.2% annualized, from December 31, 2025. The slight decrease in deposits was due to a decrease in noninterest bearing deposits and time deposits, offset partially by an increase in savings and money market accounts.

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The Company relies on increasing the deposit base to fund loans and other asset growth. The Company is in a highly competitive market and competes for local deposits by offering attractive products with competitive rates. The Company expects to have a higher average cost of funds for local deposits compared to competitor banks due to the lack of an extensive branch network. The Company’s strategy is to offset the higher cost of funding with a lower level of operating expense. When appropriate, the Company utilizes alternative funding sources such as brokered deposits. The brokered deposit market provides flexibility in structure, optionality and efficiency not afforded in traditional retail deposit channels. As of March 31, 2026, total brokered deposits were $846.3 million, an increase of $35.8 million, compared to total brokered deposits of $810.5 million at December 31, 2025. Brokered deposits continue to be used as a supplemental funding source, as needed, to support loan portfolio growth.

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The following table presents the average balance and average rate paid on each of the following deposit categories as of and for the three months ended March 31, 2026 and 2025:

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The Company’s total uninsured deposits, which are the amounts of deposit accounts that exceed the FDIC insurance limit, currently $250,000, were approximately $1.15 billion, or 26.6% of total deposits, at March 31, 2026 and $1.29 billion, or 29.8% of total deposits, at December 31, 2025. These amounts were estimated based on the same methodologies and assumptions used for regulatory reporting purposes.

Borrowed Funds

Other Borrowings

At March 31, 2026, the Company had outstanding FHLB advances of $336.0 million, compared to $399.5 million at December 31, 2025. During the three months ended March 31, 2026, the Company prepaid $97.5 million of fixed rate FHLB term advances with an average cost of 4.08% and incurred a prepayment fee of $982,000. The Company’s borrowing capacity at the FHLB is determined based on collateral pledged, generally consisting of loans. The Company had additional borrowing capacity under this credit facility of $784.9 million and $611.3 million at March 31, 2026 and December 31, 2025, respectively.

The Company has an outstanding Loan and Security Agreement and revolving note with a third party correspondent lender, which is secured by 100% of the issued and outstanding stock of the Bank. The maximum principal amount of the revolving line of credit is $40.0 million, and the facility matures on September 1, 2026. As of both March 31, 2026 and December 31, 2025, the Company had no outstanding balances under the revolving line of credit. The Company had two outstanding letters of credit totaling $2.7 million and $6.4 million under this facility as of March 31, 2026 and December 31, 2025, respectively, which reduce the availability under the facility by the amounts of the letters of credit so long as they remain outstanding.

Additionally, the Company has borrowing capacity from other sources. As of March 31, 2026, the Bank was eligible to use the Federal Reserve discount window for borrowings. Based on assets pledged as collateral as of the applicable date, the Bank’s borrowing availability was approximately $882.1 million and $1.03 billion at March 31, 2026 and December 31, 2025, respectively. As of March 31, 2026 and December 31, 2025, the Company had no outstanding advances from the discount window.

Subordinated Debentures

As of March 31, 2026 and December 31, 2025, the Company had subordinated debentures, net of issuance costs, of $108.8 million and $108.7 million, respectively.

Contractual Obligations

The following table presents supplemental information regarding total contractual obligations at March 31, 2026:

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The Company believes that it will be able to meet all contractual obligations as they come due through the maintenance of adequate cash levels. The Company expects to maintain adequate cash levels through earnings, loan and securities repayments and maturity activity and continued deposit gathering activities. As described above, the Company has in place various borrowing mechanisms for both short-term and long-term liquidity needs.

Capital

Total shareholders’ equity at March 31, 2026 was $528.4 million, an increase of $11.3 million, or 8.9% annualized, compared to total shareholders’ equity of $517.1 million at December 31, 2025. The increase was primarily due to net income retained and an increase in unrealized gains in the derivitives portfolio, offset partially by an increase in unrealized losses in the securities portfolio and preferred stock dividends.

Tangible book value per share, a non-GAAP financial measure, was $15.93 as of March 31, 2026, an increase of 9.9% annualized from $15.55 as of December 31, 2025. Tangible common equity as a percentage of tangible assets, a non-GAAP financial measure, was 8.34% at March 31, 2026, compared to 8.01% at December 31, 2025.

Stock Repurchase Program. The Company did not repurchase any shares of its common stock pursuant to its existing stock repurchase program during the three months ended March 31, 2026. As of March 31, 2026, the remaining amount that could be used to repurchase shares under the 2022 Stock Repurchase Program was $13.1 million. The Company remains committed to maintaining strong capital levels while enhancing shareholder value as it strategically executes its stock repurchase program based on various factors including valuation, capital levels and other uses of capital.

At-the-Market Common Stock Offering Program. The Company maintains an effective shelf registration statement on file with the SEC (the “Registration Statement”), which authorizes the Company to offer and sell shares of its common stock from time to time. Under the Registration Statement, the Company has established an at-the-market common stock offering program (the “ATM Program”) permitting the sale of common stock up to an aggregate gross sales price of $50 million.

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The ATM Program provides the Company with additional flexibility to access the capital markets efficiently and is intended to be used for general corporate purposes, including growth, investments in or advances to subsidiaries, working capital, capital expenditures, stock repurchases, debt repayment, or potential acquisitions. During the three months ended March 31, 2026, the Company did not sell any shares pursuant to the ATM Program.

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Regulatory Capital. The Company and the Bank are subject to various regulatory capital requirements administered by federal banking regulators. Failure to meet minimum capital requirements can initiate certain

mandatory and possibly additional discretionary actions by federal banking regulators that, if undertaken, could have a direct material effect on the Company’s and Bank’s business.

Management believes the Company and the Bank met all capital adequacy requirements to which they were subject as of March 31, 2026. The regulatory capital ratios necessary for the Company and the Bank to meet minimum capital adequacy standards, and for the Bank to be considered well capitalized under the prompt corrective action framework, are set forth in the following tables. The Company’s and the Bank’s actual capital amounts and ratios as of the dates indicated are presented in the following tables:

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Regulations include a capital conservation buffer of 2.5% that is added to the minimum requirements for capital adequacy purposes. A banking organization with a conservation buffer of less than the required amount is subject to limitations on capital distributions, including dividend payments, stock repurchases and certain discretionary bonus payments to executive officers. At March 31, 2026, the ratios for the Company and the Bank were sufficient to meet the conservation buffer.

Off-Balance Sheet Arrangements

In the normal course of business, the Company enters into various transactions to meet the financing needs of clients, which, in accordance with GAAP, are not included in the consolidated balance sheets. These transactions include commitments to extend credit, standby letters of credit, and commercial letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in the consolidated balance sheets. Most of these commitments mature within two years and the standby letters of credit are expected to expire without being drawn upon. All off-balance sheet commitments are included in the determination of the amount of risk-based capital that the Company and the Bank are required to hold.

The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit, standby letters of credit, and commercial letters of credit is represented by the contractual or notional amount of those instruments. The Company decreases its exposure to losses under these commitments by subjecting them to credit approval and monitoring procedures. The Company assesses the credit risk associated with certain commitments to extend credit and establishes a liability for probable credit losses.

The following table presents credit arrangements and financial instruments whose contract amounts represented credit risk as of March 31, 2026 and December 31, 2025:

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The Company had outstanding letters of credit with the FHLB of $39.1 million and $109.0 million at March 31, 2026 and December 31, 2025, respectively, on behalf of customers and to secure public deposits.

Liquidity

Liquidity is the Company’s capacity to meet cash and collateral obligations at a reasonable cost. Maintaining an adequate level of liquidity depends on the Company’s ability to efficiently meet both expected and unexpected cash flow and collateral needs without adversely affecting either daily operations or financial condition. The Bank’s Asset Liability Management, or ALM, Committee, is responsible for managing commitments to meet the needs of customers while achieving the Company’s financial objectives. The ALM Committee meets regularly to review balance sheet composition, funding capacities, and current and forecasted loan demand.

The Company manages liquidity by maintaining adequate levels of cash and other assets from on- and off-balance sheet arrangements. Specifically, on-balance sheet liquidity consists of cash and due from banks and unpledged investment securities available for sale, which are referred to as primary liquidity. In regards to off-balance sheet capacity, the Company maintains available borrowing capacity under secured borrowing lines with the FHLB, the Federal Reserve Bank of Minneapolis, and a correspondent lender, as well as unsecured lines of credit for the purpose of overnight funds with various correspondent banks, which the Company refers to as secondary liquidity.

Total on- and off-balance sheet liquidity was $2.59 billion as of March 31, 2026, compared to $2.51 billion at December 31, 2025.

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The following tables present a summary of primary and secondary liquidity levels as of the dates indicated:

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During the three months ended March 31, 2026, primary liquidity increased by $42.5 million due to a $147.5 million decrease in pledged securities and a $104.9 million increase in cash and cash equivalents, offset partially by a $209.9 million decrease in securities available for sale, when compared to December 31, 2025. Secondary liquidity increased by $33.0 million as of March 31, 2026, due to a $173.6 million increase in borrowing capacity with the FHLB and a $3.7 million increase in the borrowing capacity with a correspondent lender, offset partially by a $144.3 million decrease in the borrowing capacity with the Federal Reserve Bank, when compared to December 31, 2025.

In addition to primary liquidity, the Company generates liquidity from cash flows from the loan and securities portfolios and from the large base of core deposits, defined as noninterest bearing transaction, interest bearing transaction, savings, non-brokered money market accounts and non-brokered time deposits less than $250,000. At March 31, 2026, core deposits totaled approximately $3.38 billion and represented 78.4% of total deposits. These core deposits are normally less volatile, often with customer relationships tied to other products offered by the Company, which promote long-standing relationships and stable funding sources.

The Company uses brokered deposits, the availability of which is uncertain and subject to competitive market forces and regulation, for liquidity and interest rate risk management purposes. At March 31, 2026, brokered deposits totaled $846.3 million, consisting of $722.7 million of brokered time deposits and $123.6 million of non-maturity brokered money market and transaction accounts. At December 31, 2025, brokered deposits totaled $810.5 million, consisting of $665.0 million of brokered time deposits and $145.5 million of non-maturity brokered money market and transaction accounts.

The Company’s liquidity policy includes guidelines for On-Balance Sheet Liquidity (a measurement of primary liquidity to total deposits plus borrowings), Total On-Balance Sheet Liquidity with Borrowing Capacity (a measurement of primary and secondary liquidity to total deposits plus borrowings), Wholesale Funding Ratio (a measurement of total wholesale funding to total deposits plus borrowings), and other guidelines developed for measuring and maintaining liquidity.

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Non-GAAP Financial Measures

In addition to financial measures presented in accordance with GAAP, the Company routinely supplements its evaluation with an analysis of certain non-GAAP financial measures. The Company believes these 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 peers. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of non-GAAP disclosures used in this report to the comparable GAAP measures are provided in the following tables:

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