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Bridgewater Bancshares, Inc. Announces Record Second Quarter 2021 Net Income of $11.0 Million, $0.38 Diluted Earnings Per Common Share

Bridgewater Bancshares, Inc. Announces Record Second Quarter 2021 Net Income of $11.0 Million, $0.38 Diluted Earnings Per Common Share

Bridgewater Bancshares, Inc. (Nasdaq: BWB) (the Company), the parent company of Bridgewater Bank (the Bank), today announced net income of $11.0 million for the second quarter of 2021, a 3.0% increase over net income of $10.7 million for the first quarter of 2021, and a 44.7% increase over net income of $7.6 million for the second quarter of 2020. Net income per diluted common share for the second quarter of 2021 was $0.38, a 2.4% increase compared to $0.37 per diluted common share for the first quarter of 2021, and a 44.9% increase, compared to $0.26 per diluted common share for the same period in 2020.

“Bridgewater reported another quarter of record net income driven by robust organic loan growth, superb asset quality and a highly efficient business model,” said Chairman, Chief Executive Officer, and President, Jerry Baack. “Our unique ability to generate profitable loan growth in the current market has been the result of client acquisition opportunities from M&A-related market disruption, the expansion of our lending teams through opportunistic hires, and our strong brand and service model in the Twin Cities. This loan growth, along with a stabilizing core net interest margin, has led to continued revenue growth, all while maintaining consistently low levels of net charge-offs and nonperforming assets. With our proven growth engine and an efficiency ratio among the lowest in the industry, we believe we are well-positioned to continue gaining market share in the attractive Twin Cities market.”

Second Quarter 2021 Financial Results

 

 

 

 

 

 

Diluted

 

Nonperforming

 

Adjusted

ROA

 

PPNR ROA (1)

 

ROE

 

earnings per share

 

assets to total assets

 

efficiency ratio (1)

1.43%

 

2.07%

 

15.40%

 

$

0.38

 

0.02%

 

41.5%

_________________________________

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

Second Quarter 2021 Highlights

  • Diluted earnings per common share were $0.38 for the second quarter of 2021, compared to $0.37 per common share for the first quarter of 2021.
  • Annualized return on average assets (ROA) and annualized return on average common equity (ROE) for the second quarter of 2021 were 1.43% and 15.40%, compared to ROA and ROE of 1.47% and 15.87%, respectively, for the first quarter of 2021.
  • Pre-provision net revenue (PPNR), a non-GAAP financial measure, was $15.9 million for the second quarter of 2021, an increase of 1.6%, compared to $15.6 million from the first quarter of 2021. PPNR ROA, a non-GAAP financial measure, was 2.07% for the second quarter of 2021, compared to 2.15% for the first quarter of 2021.
  • Gross loans increased $168.1 million in the second quarter of 2021, or 27.8% annualized, compared to the first quarter of 2021. Gross loans, excluding Paycheck Protection Program (PPP) loans, increased $232.2 million in the second quarter of 2021, or 41.2% annualized, compared to the first quarter of 2021.
  • Deposits increased $82.3 million in the second quarter of 2021, or 12.5% annualized, compared to the first quarter of 2021.
  • Net interest margin was 3.52% for the second quarter of 2021, compared to 3.60% in the first quarter of 2021.
  • The adjusted efficiency ratio, a non-GAAP financial measure which excludes the impact of certain non-routine income and expenses from noninterest expense, was 41.5% for the second quarter of 2021, compared to 40.7% for the first quarter of 2021.
  • A loan loss provision of $1.6 million was recorded in the second quarter of 2021 to support strong organic loan growth. The allowance for loan losses to total loans was 1.45% at June 30, 2021, compared to 1.48% at March 31, 2021. The allowance for loan losses to total loans, excluding PPP loans, was 1.50% at June 30, 2021, compared to 1.59% at March 31, 2021.
  • Annualized net loan charge-offs (recoveries) as a percentage of average loans were 0.00% for the second quarter of 2021, compared to (0.01)% for the first quarter of 2021.
  • Tangible book value per share, a non-GAAP financial measure, increased 4.3%, or $0.42, to $10.22 at June 30, 2021, compared to $9.80 at March 31, 2021.
  • The Company purchased $25.0 million of bank owned life insurance policies on certain officers.

Recent Developments

On July 8, 2021, the Company announced the completion of a private placement of $30.0 million in aggregate principal amount of 3.25% fixed-to-floating rate subordinated notes due 2031. The Company intends to use the net proceeds of the private placement for general corporate purposes, including support for organic growth plans, support for bank level capital ratios and possible redemption or repurchase of currently outstanding indebtedness.

Key Financial Measures

 

As of and for the Three Months Ended

 

As of and for the Six Months Ended

 

June 30,

 

March 31,

 

June 30,

 

June 30,

 

June 30,

 

2021

 

2021

 

2020

 

2021

 

2020

Per Common Share Data

 

 

 

 

 

Basic Earnings Per Share

$

0.39

 

$

0.38

 

$

0.26

 

$

0.77

 

$

0.52

 

Diluted Earnings Per Share

 

0.38

 

 

0.37

 

 

0.26

 

 

0.75

 

 

0.51

 

Book Value Per Share

 

10.33

 

 

9.92

 

 

8.92

 

 

10.33

 

 

8.92

 

Tangible Book Value Per Share (1)

 

10.22

 

 

9.80

 

 

8.80

 

 

10.22

 

 

8.80

 

Basic Weighted Average Shares Outstanding

 

28,040,762

 

 

28,017,366

 

 

28,676,441

 

 

28,029,129

 

 

28,733,968

 

Diluted Weighted Average Shares Outstanding

 

29,128,181

 

 

28,945,212

 

 

29,165,157

 

 

29,048,424

 

 

29,350,426

 

Shares Outstanding at Period End

 

28,162,777

 

 

28,132,929

 

 

28,837,560

 

 

28,162,777

 

 

28,837,560

 

 

 

 

 

 

 

Selected Performance Ratios

 

 

 

 

 

Return on Average Assets (Annualized)

 

1.43

%

 

1.47

%

 

1.17

%

 

1.45

%

 

1.22

%

Pre-Provision Net Revenue Return on Average Assets (Annualized) (1)

 

2.07

 

 

2.15

 

 

2.00

 

 

2.11

 

 

2.05

 

Return on Average Common Equity (Annualized)

 

15.40

 

 

15.87

 

 

11.98

 

 

15.63

 

 

11.96

 

Return on Average Tangible Common Equity (Annualized) (1)

 

15.58

 

 

16.06

 

 

12.14

 

 

15.81

 

 

12.12

 

Yield on Interest Earning Assets

 

4.17

 

 

4.31

 

 

4.45

 

 

4.24

 

 

4.66

 

Yield on Total Loans, Gross

 

4.56

 

 

4.74

 

 

4.85

 

 

4.64

 

 

5.00

 

Cost of Interest Bearing Liabilities

 

0.96

 

 

1.04

 

 

1.58

 

 

1.00

 

 

1.70

 

Cost of Total Deposits

 

0.54

 

 

0.59

 

 

0.99

 

 

0.56

 

 

1.12

 

Net Interest Margin (2)

 

3.52

 

 

3.60

 

 

3.38

 

 

3.56

 

 

3.48

 

Core Net Interest Margin (1)(2)

 

3.31

 

 

3.34

 

 

3.22

 

 

3.33

 

 

3.29

 

Efficiency Ratio (1)

 

42.0

 

 

41.2

 

 

48.6

 

 

41.6

 

 

46.5

 

Adjusted Efficiency Ratio (1)

 

41.5

 

 

40.7

 

 

40.4

 

 

41.1

 

 

42.2

 

Noninterest Expense to Average Assets (Annualized)

 

1.50

 

 

1.51

 

 

1.64

 

 

1.50

 

 

1.67

 

Adjusted Noninterest Expense to Average Assets (Annualized) (1)

 

1.48

 

 

1.49

 

 

1.37

 

 

1.48

 

 

1.51

 

Loan to Deposit Ratio

 

95.3

 

 

91.9

 

 

97.8

 

 

 

Core Deposits to Total Deposits(3)

 

81.2

 

 

83.5

 

 

75.7

 

 

 

Tangible Common Equity to Tangible Assets (1)

 

9.10

 

 

8.99

 

 

9.23

 

 

 

 

 

 

 

 

 

Capital Ratios (Bank Only) (4)

 

 

 

 

 

Tier 1 Leverage Ratio

 

10.57

%

 

10.65

%

 

11.36

%

 

 

Tier 1 Risk-based Capital Ratio

 

11.24

 

 

12.08

 

 

12.96

 

 

 

Total Risk-based Capital Ratio

 

12.49

 

 

13.33

 

 

14.21

 

 

 

 

 

 

 

 

 

Capital Ratios (Consolidated) (4)

 

 

 

 

 

Tier 1 Leverage Ratio

 

9.08

%

 

9.11

%

 

9.94

%

 

 

Tier 1 Risk-based Capital Ratio

 

9.67

 

 

10.34

 

 

11.39

 

 

 

Total Risk-based Capital Ratio

 

13.49

 

 

14.46

 

 

15.99

 

 

_________________________________

(1)

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

(2)

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

(3)

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

(4)

Preliminary data. Current period subject to change prior to filings with applicable regulatory agencies.

Selected Financial Data

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

June 30,

(dollars in thousands)

2021

 

2021

 

2020

 

2020

 

2020

Selected Balance Sheet Data

 

 

 

 

 

Total Assets

$

3,162,612

$

3,072,359

$

2,927,345

$

2,774,564

$

2,754,463

Total Loans, Gross

 

2,594,186

 

2,426,123

 

2,326,428

 

2,259,228

 

2,193,778

Allowance for Loan Losses

 

37,591

 

35,987

 

34,841

 

31,381

 

27,633

Goodwill and Other Intangibles

 

3,200

 

3,248

 

3,296

 

3,344

 

3,391

 

 

 

 

 

 

Deposits

 

2,720,906

 

2,638,654

 

2,501,636

 

2,273,044

 

2,242,051

Tangible Common Equity (1)

 

287,630

 

275,923

 

262,109

 

262,088

 

253,799

Total Shareholders' Equity

 

290,830

 

279,171

 

265,405

 

265,432

 

257,190

Average Total Assets - Quarter-to-Date

 

3,076,712

 

2,940,262

 

2,816,032

 

2,711,755

 

2,622,272

Average Common Equity - Quarter-to-Date

 

286,311

 

272,729

 

265,716

 

263,195

 

255,109

_________________________________

(1)

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

 

 

For the Three Months Ended

 

For the Six Months Ended

 

 

June 30,

 

March 31,

 

June 30,

 

June 30,

 

June 30,

(dollars in thousands)

 

2021

 

2021

 

2020

 

2021

 

2020

Selected Income Statement Data

 

 

 

 

 

 

 

 

 

 

Interest Income

 

$

31,147

 

$

30,440

 

$

28,166

 

$

61,587

 

$

55,634

Interest Expense

 

 

4,859

 

 

5,045

 

 

6,824

 

 

9,904

 

 

14,190

Net Interest Income

 

 

26,288

 

 

25,395

 

 

21,342

 

 

51,683

 

 

41,444

Provision for Loan Losses

 

 

1,600

 

 

1,100

 

 

3,000

 

 

2,700

 

 

5,100

Net Interest Income after Provision for Loan Losses

 

 

24,688

 

 

24,295

 

 

18,342

 

 

48,983

 

 

36,344

Noninterest Income

 

 

1,603

 

 

1,008

 

 

1,977

 

 

2,611

 

 

3,696

Noninterest Expense

 

 

11,477

 

 

10,923

 

 

10,711

 

 

22,400

 

 

20,457

Income Before Income Taxes

 

 

14,814

 

 

14,380

 

 

9,608

 

 

29,194

 

 

19,583

Provision for Income Taxes

 

 

3,821

 

 

3,709

 

 

2,010

 

 

7,530

 

 

4,542

Net Income

 

$

10,993

 

$

10,671

 

$

7,598

 

$

21,664

 

$

15,041

Income Statement

Net Interest Income

Net interest income was $26.3 million for the second quarter of 2021, an increase of $893,000, or 3.5%, from $25.4 million in the first quarter of 2021, and an increase of $4.9 million, or 23.2%, from $21.3 million in the second quarter of 2020. The linked-quarter and year-over-year increases in net interest income were primarily due to growth in average interest earning assets, lower rates paid on deposits, and the recognition of PPP loan origination fees, offset partially by declining yields on loans. Average interest earning assets were $3.02 billion for the second quarter of 2021, an increase of $136.4 million, or 4.7%, from $2.88 billion for the first quarter of 2021, and an increase of $452.1 million, or 17.6%, from $2.57 billion for the second quarter of 2020. The linked-quarter increase in average interest earning assets was primarily due to robust organic growth in the loan portfolio. The year-over-year increase in average interest earning assets was primarily due to strong organic growth in the loan portfolio, as well as continued purchases of investment securities.

Net interest margin (on a fully tax-equivalent basis) for the second quarter of 2021 was 3.52%, an 8 basis point decline from 3.60% in the first quarter of 2021, and a 14 basis point increase from 3.38% in the second quarter of 2020. Core net interest margin (on a fully tax-equivalent basis), a non-GAAP financial measure which excludes the impact of loan fees and PPP balances, interest, and fees, for the second quarter of 2021 was 3.31%, a 3 basis point decline from 3.34% in the first quarter of 2021, and a 9 basis point increase from 3.22% in the second quarter of 2020.

While the origination volume of PPP loans earning 1.00% negatively impacted net interest margin, the recognition of fees associated with the originations has benefited net interest margin for each of the past three quarters. The SBA began forgiving PPP loans, which has accelerated the recognition of PPP fees starting in the fourth quarter of 2020 and continuing into the second quarter of 2021. The Company recognized $1.4 million of PPP origination fees during the second quarter of 2021, compared to $1.5 million during the first quarter of 2021. The elevated fee recognition is illustrated in the 4.75% PPP loan yield for the second quarter of 2021.

The following table summarizes PPP loan originations and net origination fees as of June 30, 2021:

 

Originated

 

Outstanding

 

Program Lifetime

 

Number

 

Principal

 

Number

 

Principal

 

Net Origination

 

Net Origination

(dollars in thousands)

of Loans

 

Balance

 

of Loans

 

Balance

 

Fees Generated

 

Fees Earned

Round One PPP Loans

1,200

$

181,600

225

$

27,184

$

5,706

$

5,330

Round Two PPP Loans

651

 

78,386

606

 

71,888

 

3,544

 

498

Totals

1,851

$

259,986

831

$

99,072

$

9,250

$

5,828

Interest income was $31.1 million for the second quarter of 2021, an increase of $707,000, or 2.3%, from $30.4 million in the first quarter of 2021, and an increase of $3.0 million, or 10.6%, from $28.2 million in the second quarter of 2020. The yield on interest earning assets (on a fully tax-equivalent basis) was 4.17% in the second quarter of 2021, compared to 4.31% in the first quarter of 2021, and 4.45% in the second quarter of 2020. The linked-quarter decrease in the yield on interest earning assets was primarily due to the historically low interest rate environment resulting in a lower loan yield and lower loan fees recognized, offset partially by $1.4 million of PPP loan origination fees. The year-over-year decline in the yield on interest earning assets was primarily due to the historically low interest rate environment resulting in lower loan and security yields.

Loan interest income and loan fees remain the primary contributing factors to the changes in yield on interest earning assets. The aggregate loan yield, excluding PPP loans, decreased to 4.54% in the second quarter of 2021, which was 18 basis points lower than 4.72% in the first quarter of 2021, and 47 basis points lower than 5.01% in the second quarter of 2020. While loan fees have maintained a relatively stable contribution to the aggregate loan yield, the historically low yield curve has resulted in a declining core yield on loans in comparison to both prior periods.

A summary of interest and fees recognized on loans, excluding PPP loans, for the periods indicated is as follows:

 

Three Months Ended

 

June 30, 2021

 

March 31, 2021

 

December 31, 2020

 

September 30, 2020

 

June 30, 2020

Interest

4.37

%

4.50

%

4.59

%

4.69

%

4.76

%

Fees

0.17

 

0.22

 

0.28

 

0.24

 

0.25

 

Yield on Loans, Excluding PPP Loans

4.54

%

4.72

%

4.87

%

4.93

%

5.01

%

Interest expense was $4.9 million for the second quarter of 2021, a decrease of $186,000, or 3.7%, from $5.0 million in the first quarter of 2021, and a decrease of $2.0 million, or 28.8%, from $6.8 million in the second quarter of 2020. The cost of interest bearing liabilities declined 8 basis points on a linked-quarter basis from 1.04% in the first quarter of 2021 to 0.96% in the second quarter of 2021, primarily due to lower rates paid on deposits. On a year-over-year basis, the cost of interest bearing liabilities decreased 62 basis points from 1.58% in the second quarter of 2020 to 0.96% in the second quarter of 2021, primarily due to lower rates paid on deposits, the payoff of the Company’s notes payable, and the early extinguishment of $94.0 million of longer term FHLB advances, offset partially by strong growth of interest bearing deposits and additional subordinated debentures.

Interest expense on deposits was $3.5 million for the second quarter of 2021, a decrease of $159,000, or 4.3%, from $3.7 million in the first quarter of 2021, and a decrease of $1.7 million, or 32.1%, from $5.2 million in the second quarter of 2020. The cost of total deposits declined 5 basis points on a linked-quarter basis from 0.59% in the first quarter of 2021, and declined 45 basis points on a year-over-year basis from 0.99% in the second quarter of 2020, to 0.54% in the second quarter of 2021, primarily due to deposit rate cuts consistent with a lower rate environment and the downward repricing of time deposits. The Company anticipates more opportunities to lower the cost of total deposits due to continued deposit repricing as time deposits mature and the recent success of adding efficient, low-cost brokered deposits.

A summary of the Company’s average balances, interest yields and rates, and net interest margin for the three months ended June 30, 2021, March 31, 2021, and June 30, 2020 is as follows:

 

For the Three Months Ended

 

June 30, 2021

 

March 31, 2021

 

June 30, 2020

 

Average

 

Interest

 

Yield/

 

Average

 

Interest

 

Yield/

 

Average

 

Interest

 

Yield/

 

Balance

 

& Fees

 

Rate

 

Balance

 

& Fees

 

Rate

 

Balance

 

& Fees

 

Rate

(dollars in thousands)

 

 

 

 

 

 

 

 

 

Interest Earning Assets:

 

 

 

 

 

 

 

 

 

Cash Investments

$

88,067

$

33

 

0.15

%

$

105,477

$

34

 

0.13

%

$

109,073

$

37

 

0.14

%

Investment Securities:

 

 

 

 

 

 

 

 

 

Taxable Investment Securities

 

314,049

 

1,647

 

2.10

 

 

301,680

 

1,723

 

2.32

 

 

203,559

 

1,304

 

2.58

 

Tax-Exempt Investment Securities (1)

 

77,029

 

842

 

4.38

 

 

80,963

 

881

 

4.41

 

 

91,793

 

996

 

4.37

 

Total Investment Securities

 

391,078

 

2,489

 

2.55

 

 

382,643

 

2,604

 

2.76

 

 

295,352

 

2,300

 

3.13

 

Paycheck Protection Program Loans (2)

 

149,312

 

1,767

 

4.75

 

 

148,881

 

1,864

 

5.08

 

 

139,235

 

873

 

2.52

 

Loans (1)(2)

 

2,384,759

 

27,011

 

4.54

 

 

2,241,038

 

26,074

 

4.72

 

 

2,013,163

 

25,070

 

5.01

 

Total Loans

 

2,534,071

 

28,778

 

4.56

 

 

2,389,919

 

27,938

 

4.74

 

 

2,152,398

 

25,943

 

4.85

 

Federal Home Loan Bank Stock

 

6,221

 

54

 

3.51

 

 

5,045

 

78

 

6.28

 

 

10,469

 

125

 

4.81

 

Total Interest Earning Assets

 

3,019,437

 

31,354

 

4.17

%

 

2,883,084

 

30,654

 

4.31

%

 

2,567,292

 

28,405

 

4.45

%

Noninterest Earning Assets

 

57,275

 

 

 

57,178

 

 

 

54,980

 

 

Total Assets

$

3,076,712

 

 

$

2,940,262

 

 

$

2,622,272

 

 

Interest Bearing Liabilities:

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

Interest Bearing Transaction Deposits

$

421,132

$

520

 

0.50

%

$

364,017

$

422

 

0.47

%

$

272,565

$

377

 

0.56

%

Savings and Money Market Deposits

 

764,632

 

940

 

0.49

 

 

724,104

 

1,008

 

0.56

 

 

521,313

 

1,327

 

1.02

 

Time Deposits

 

332,346

 

1,075

 

1.30

 

 

344,715

 

1,267

 

1.49

 

 

388,357

 

2,122

 

2.20

 

Brokered Deposits

 

379,768

 

978

 

1.03

 

 

402,694

 

974

 

0.98

 

 

319,711

 

1,344

 

1.69

 

Total Interest Bearing Deposits

 

1,897,878

 

3,513

 

0.74

 

 

1,835,530

 

3,671

 

0.81

 

 

1,501,946

 

5,170

 

1.38

 

Federal Funds Purchased

 

9,932

 

6

 

0.24

 

 

 

 

 

 

9

 

 

0.72

 

Notes Payable

 

 

 

 

 

6,722

 

61

 

3.66

 

 

12,000

 

111

 

3.72

 

FHLB Advances

 

57,500

 

228

 

1.59

 

 

57,500

 

228

 

1.61

 

 

193,819

 

1,064

 

2.21

 

Subordinated Debentures

 

73,862

 

1,112

 

6.04

 

 

73,776

 

1,085

 

5.96

 

 

31,228

 

479

 

6.17

 

Total Interest Bearing Liabilities

 

2,039,172

 

4,859

 

0.96

%

 

1,973,528

 

5,045

 

1.04

%

 

1,739,002

 

6,824

 

1.58

%

Noninterest Bearing Liabilities:

 

 

 

 

 

 

 

 

 

Noninterest Bearing Transaction Deposits

 

732,299

 

 

 

676,173

 

 

 

603,456

 

 

Other Noninterest Bearing Liabilities

 

18,930

 

 

 

17,832

 

 

 

24,705

 

 

Total Noninterest Bearing Liabilities

 

751,229

 

 

 

694,005

 

 

 

628,161

 

 

Shareholders' Equity

 

286,311

 

 

 

272,729

 

 

 

255,109

 

 

Total Liabilities and Shareholders' Equity

$

3,076,712

 

 

$

2,940,262

 

 

$

2,622,272

 

 

Net Interest Income / Interest Rate Spread

 

 

26,495

 

3.21

%

 

 

25,609

 

3.27

%

 

 

21,581

 

2.87

%

Net Interest Margin (3)

 

 

3.52

%

 

 

3.60

%

 

 

3.38

%

Taxable Equivalent Adjustment:

 

 

 

 

 

 

 

 

 

Tax-Exempt Investment Securities and Loans

 

 

(207

)

 

 

 

(214

)

 

 

 

(239

)

 

Net Interest Income

 

$

26,288

 

 

 

$

25,395

 

 

 

$

21,342

 

 

_________________________________

(1)

Interest income and average rates for tax-exempt investment securities and loans are presented on a tax-equivalent basis, assuming a statutory 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.

Provision for Loan Losses

The provision for loan losses was $1.6 million for the second quarter of 2021, an increase of $500,000 from $1.1 million for the first quarter of 2021, and a decrease of $1.4 million from $3.0 million for the second quarter of 2020. The provision recorded in the second quarter of 2021 was primarily attributable to growth of the loan portfolio. The allowance for loan losses to total loans was 1.45% at June 30, 2021, compared to 1.48% at March 31, 2021, and 1.26% at June 30, 2020. The allowance for loan losses to total loans, excluding PPP loans, was 1.50% at June 30, 2021, compared to 1.59% at March 31, 2021, and 1.37% at June 30, 2020.

As an emerging growth company, the Company is not subject to Accounting Standards Update No. 2016-13 “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments,“ or CECL, until January 1, 2023.

The following table presents the activity in the Company’s allowance for loan losses for the periods indicated:

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

March 31,

 

June 30,

 

June 30,

 

June 30,

(dollars in thousands)

 

2021

 

2021

 

2020

 

2021

 

2020

Balance at Beginning of Period

 

$

35,987

 

 

$

34,841

 

 

$

24,585

 

 

$

34,841

 

 

$

22,526

 

Provision for Loan Losses

 

 

1,600

 

 

 

1,100

 

 

 

3,000

 

 

 

2,700

 

 

 

5,100

 

Charge-offs

 

 

(3

)

 

 

(14

)

 

 

(1

)

 

 

(17

)

 

 

(48

)

Recoveries

 

 

7

 

 

 

60

 

 

 

49

 

 

 

67

 

 

 

55

 

Balance at End of Period

 

$

37,591

 

 

$

35,987

 

 

$

27,633

 

 

$

37,591

 

 

$

27,633

 

Noninterest Income

Noninterest income was $1.6 million for the second quarter of 2021, an increase of $595,000 from $1.0 million for the first quarter of 2021, and a decrease of $374,000 from $2.0 million for the second quarter of 2020. The linked-quarter increase was primarily due to increased gains on sales of securities, offset partially by a decrease in letter of credit fees. The year-over-year decrease was primarily due to lower gains on sales of securities, offset partially by increased customer service fees and other income.

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

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

March 31,

 

June 30,

 

June 30,

 

June 30,

(dollars in thousands)

 

2021

 

2021

 

2020

 

2021

 

2020

Noninterest Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer Service Fees

 

$

231

 

$

234

 

$

135

 

$

465

 

$

375

Net Gain on Sales of Securities

 

 

702

 

 

 

 

1,361

 

 

702

 

 

1,364

Letter of Credit Fees

 

 

231

 

 

327

 

 

265

 

 

558

 

 

539

Debit Card Interchange Fees

 

 

141

 

 

130

 

 

99

 

 

271

 

 

191

Swap Fees

 

 

 

 

 

 

 

 

 

 

907

Other Income

 

 

298

 

 

317

 

 

117

 

 

615

 

 

320

Totals

 

$

1,603

 

$

1,008

 

$

1,977

 

$

2,611

 

$

3,696

Noninterest Expense

Noninterest expense was $11.5 million for the second quarter of 2021, an increase of $554,000 from $10.9 million for the first quarter of 2021, and an increase of $766,000 from $10.7 million for the second quarter of 2020. The linked-quarter increase was primarily due to an increase in salaries and employee benefits and technology expenses. The year-over-year increase was primarily attributable to increased salaries and employee benefits, occupancy and equipment, technology, and marketing and advertising expenses, offset partially by a $1.4 million decrease in FHLB advance prepayment fees incurred in the second quarter of 2020, as well as lower amortization of tax credit investments.

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

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

March 31,

 

June 30,

 

June 30,

 

June 30,

(dollars in thousands)

 

2021

 

2021

 

2020

 

2021

 

2020

Noninterest Expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and Employee Benefits

 

$

7,512

 

$

7,102

 

$

6,348

 

$

14,614

 

$

12,802

Occupancy and Equipment

 

 

980

 

 

1,055

 

 

672

 

 

2,035

 

 

1,385

FDIC Insurance Assessment

 

 

290

 

 

315

 

 

168

 

 

605

 

 

358

Data Processing

 

 

300

 

 

291

 

 

238

 

 

591

 

 

467

Professional and Consulting Fees

 

 

552

 

 

544

 

 

423

 

 

1,096

 

 

908

Information Technology and Telecommunications

 

 

549

 

 

462

 

 

326

 

 

1,011

 

 

592

Marketing and Advertising

 

 

314

 

 

286

 

 

85

 

 

600

 

 

551

Intangible Asset Amortization

 

 

47

 

 

48

 

 

47

 

 

95

 

 

95

Amortization of Tax Credit Investments

 

 

140

 

 

118

 

 

362

 

 

258

 

 

447

FHLB Advance Prepayment Fees

 

 

 

 

 

 

1,430

 

 

 

 

1,430

Other Expense

 

 

793

 

 

702

 

 

612

 

 

1,495

 

 

1,422

Totals

 

$

11,477

 

$

10,923

 

$

10,711

 

$

22,400

 

$

20,457

In the second quarter of 2021, the Company attracted 18 new hires in lending, deposit gathering, technology, risk management, and other supportive roles, which continued to demonstrate the Company’s status as a preferred employer amidst ongoing market disruption. The Company reached 214 full-time equivalent employees at June 30, 2021, compared to 200 employees at March 31, 2021, and 173 employees at June 30, 2020.

The efficiency ratio, a non-GAAP financial measure, was 42.0% for the second quarter of 2021, compared to 41.2% for the first quarter of 2021, and 48.6% for the second quarter of 2020. Excluding the impact of certain non-routine income and expenses, the adjusted efficiency ratio, a non-GAAP financial measure, was 41.5% for the second quarter of 2021, 40.7% for the first quarter of 2021 and 40.4% for the second quarter of 2020. The efficiencies of the Company’s “branch-light” model have positioned the Company well for when the pandemic ends, and going forward, providing more flexibility for the Company to make significant investments in technology as the industry adapts to evolving client behavior.

Income Taxes

The effective combined federal and state income tax rate for the first and second quarters of 2021 was 25.8%, an increase from 20.9% for the second quarter of 2020.

Balance Sheet

Total assets at June 30, 2021 were $3.16 billion, a 2.9% increase from $3.07 billion at March 31, 2021, and a 14.8% increase from $2.75 billion at June 30, 2020. The linked-quarter increase in total assets was primarily due to robust organic loan growth, offset partially by a corresponding decrease in cash and cash equivalents. The year-over-year increase in total assets was primarily due to robust organic loan growth, as well as deploying excess liquidity into investment securities.

Total gross loans at June 30, 2021 were $2.59 billion, an increase of $168.1 million, or 6.9%, over total gross loans of $2.43 billion at March 31, 2021, and an increase of $400.4 million, or 18.3%, over total gross loans of $2.19 billion at June 30, 2020. The increase in the loan portfolio during the second quarter of 2021 was primarily due to growth in the multifamily and construction and land development segments, offset partially by declining PPP loan balances. When excluding the PPP loans altogether, gross loans grew $232.2 million during the second quarter of 2021, or 41.2% on an annualized basis. The Company's continued strong loan growth has been driven by M&A-related market disruption in the Twin Cities resulting in client and banker acquisition opportunities, PPP-related client acquisition opportunities, the expansion of the talented lending teams, and the strong and growing brand in the Twin Cities market.

The following table presents the dollar composition of the Company’s loan portfolio, by category, at the dates indicated:

 

June 30, 2021

March 31, 2021

December 31, 2020

September 30, 2020

June 30, 2020

(dollars in thousands)

 

 

 

 

 

Commercial

$

321,474

 

$

301,023

 

$

304,220

 

$

287,254

 

$

302,536

 

Paycheck Protection Program

 

99,072

 

 

163,258

 

 

138,454

 

 

181,596

 

 

180,228

 

Construction and Land Development

 

251,573

 

 

193,372

 

 

170,217

 

 

175,882

 

 

191,768

 

Real Estate Mortgage:

 

 

 

 

 

1 - 4 Family Mortgage

 

277,943

 

 

294,964

 

 

294,479

 

 

286,089

 

 

289,456

 

Multifamily

 

790,275

 

 

665,415

 

 

626,465

 

 

585,814

 

 

522,491

 

CRE Owner Occupied

 

87,507

 

 

79,665

 

 

75,604

 

 

75,963

 

 

73,539

 

CRE Nonowner Occupied

 

758,101

 

 

720,396

 

 

709,300

 

 

660,058

 

 

627,651

 

Total Real Estate Mortgage Loans

 

1,913,826

 

 

1,760,440

 

 

1,705,848

 

 

1,607,924

 

 

1,513,137

 

Consumer and Other

 

8,241

 

 

8,030

 

 

7,689

 

 

6,572

 

 

6,109

 

Total Loans, Gross

 

2,594,186

 

 

2,426,123

 

 

2,326,428

 

 

2,259,228

 

 

2,193,778

 

Allowance for Loan Losses

 

(37,591

)

 

(35,987

)

 

(34,841

)

 

(31,381

)

 

(27,633

)

Net Deferred Loan Fees

 

(11,450

)

 

(11,273

)

 

(9,151

)

 

(10,367

)

 

(10,287

)

Total Loans, Net

$

2,545,145

 

$

2,378,863

 

$

2,282,436

 

$

2,217,480

 

$

2,155,858

 

Total deposits at June 30, 2021 were $2.72 billion, an increase of $82.3 million, or 3.1%, over total deposits of $2.64 billion at March 31, 2021, and an increase of $478.9 million, or 21.4%, over total deposits of $2.24 billion at June 30, 2020. Deposit growth in the second quarter of 2021 was primarily due to an increase in noninterest bearing transaction deposits and brokered deposits, offset partially by a decline in savings and money market deposits and time deposits. Similar to the loan portfolio, the growth in core deposits has been a result of successful new client and banker acquisition initiatives and the strong, growing brand in the Twin Cities market. Brokered deposits increased back to levels last seen in the fourth quarter of 2020 due to the opportunity to obtain $75.0 million in funding at 1 basis point at various short-term maturities ranging from 3-12 months. As illustrated, the brokered deposit market provides flexibility in structure, optionality and efficiency not provided in traditional, retail deposit channels. Given the fluid environment, management believes deposits could experience fluctuations in future periods.

The following table presents the dollar composition of the Company’s deposit portfolio, by category, at the dates indicated:

 

June 30, 2021

March 31, 2021

December 31, 2020

September 30, 2020

June 30, 2020

(dollars in thousands)

 

 

 

 

 

Noninterest Bearing Transaction Deposits

$

758,023

$

712,999

$

671,903

$

685,773

$

648,869

Interest Bearing Transaction Deposits

 

432,123

 

433,344

 

366,290

 

322,253

 

285,386

Savings and Money Market Deposits

 

761,485

 

791,583

 

657,617

 

498,397

 

516,543

Time Deposits

 

321,857

 

344,581

 

353,543

 

363,897

 

382,187

Brokered Deposits

 

447,418

 

356,147

 

452,283

 

402,724

 

409,066

Total Deposits

$

2,720,906

$

2,638,654

$

2,501,636

$

2,273,044

$

2,242,051

Total shareholders’ equity at June 30, 2021 was $290.8 million, an increase of $11.7 million, or 4.2%, over total shareholders’ equity of $279.2 million at March 31, 2021, and an increase of $33.6 million, or 13.1%, over total shareholders’ equity of $257.2 million at June 30, 2020. The linked-quarter increase was due to net income retained. The year-over-year increase was due to net income retained and an increase in unrealized gains in the securities and derivatives portfolios, offset partially by stock repurchases made under the Company’s stock repurchase program. The Company did not repurchase any shares of its common stock during the second quarter of 2021.

Tangible book value per share, a non-GAAP financial measure, was $10.22 as of June 30, 2021, an increase of 4.3% from $9.80 as of March 31, 2021, and an increase of 16.2% from $8.80 as of June 30, 2020.

Subsequent to the end of the quarter, on July 8, 2021 the Company issued $30.0 million of 3.25% Fixed-to-Floating Rate Subordinated Notes due 2031 in a private placement transaction. These notes are callable starting on July 15, 2026 and qualify for tier 2 capital treatment at the holding company level. The Company intends to use the net proceeds of the private placement for general corporate purposes, including support for organic growth plans, support for bank level capital ratios and possible redemption or repurchase of currently outstanding indebtedness.

Asset Quality

Annualized net charge-offs (recoveries) as a percent of average loans for the second quarter of 2021 were 0.00%, compared to (0.01)% for the first quarter of 2021, and (0.01)% for the second quarter of 2020. At June 30, 2021, the Company’s nonperforming assets, which include nonaccrual loans, loans past due 90 days and still accruing, and foreclosed assets, were $761,000, or 0.02% of total assets, as compared to $770,000, or 0.03% of total assets at March 31, 2021, and $602,000 or 0.02% of total assets at June 30, 2020.

The Company has increased oversight and analysis of all segments of the loan portfolio in response to the COVID-19 pandemic, especially in vulnerable industries such as hospitality and restaurants, to proactively monitor evolving credit risk. Loans that have potential weaknesses that warrant a watchlist risk rating at June 30, 2021 totaled $56.7 million, compared to $58.3 million at March 31, 2021. As the COVID-19 pandemic continues to evolve, the length and extent of the economic uncertainty may result in further watchlist or adverse classifications in the loan portfolio. Loans that warranted a substandard risk rating at June 30, 2021 totaled $7.2 million, compared to $6.7 million at March 31, 2021.

The following table presents a summary of asset quality measurements at the dates indicated:

 

As of and for the Three Months Ended

 

June 30,

 

March 31

 

December 31,

 

September 30,

 

June 30,

(dollars in thousands)

2021

 

2021

 

2020

 

2020

 

2020

Selected Asset Quality Data

 

 

 

 

 

Loans 30-89 Days Past Due

$

 

$

 

$

13

 

$

458

 

$

153

 

Loans 30-89 Days Past Due to Total Loans

 

0.00

%

 

0.00

%

 

0.00

%

 

0.02

%

 

0.01

%

Nonperforming Loans

$

761

 

$

770

 

$

775

 

$

433

 

$

602

 

Nonperforming Loans to Total Loans

 

0.03

%

 

0.03

%

 

0.03

%

 

0.02

%

 

0.03

%

Foreclosed Assets

$

 

$

 

$

 

$

 

$

 

Nonaccrual Loans to Total Loans

 

0.03

%

 

0.03

%

 

0.03

%

 

0.02

%

 

0.03

%

Nonaccrual Loans and Loans Past Due 90 Days and Still Accruing to Total Loans

 

0.03

 

 

0.03

 

 

0.03

 

 

0.02

 

 

0.03

 

Nonperforming Assets (1)

$

761

 

$

770

 

$

775

 

$

433

 

$

602

 

Nonperforming Assets to Total Assets (1)

 

0.02

%

 

0.03

%

 

0.03

%

 

0.02

%

 

0.02

%

Allowance for Loan Losses to Total Loans

 

1.45

 

 

1.48

 

 

1.50

 

 

1.39

 

 

1.26

 

Allowance for Loan Losses to Total Loans, Excluding PPP Loans

 

1.51

 

 

1.59

 

 

1.59

 

 

1.51

 

 

1.37

 

Allowance for Loans Losses to Nonperforming Loans

 

4,939.68

 

 

4,673.64

 

 

4,495.61

 

 

7,247.34

 

 

4,590.20

 

Net Loan Charge-Offs (Recoveries) (Annualized) to Average Loans

 

0.00

 

 

(0.01

)

 

0.08

 

 

0.00

 

 

(0.01

)

_________________________________

(1)

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

The Company developed programs for clients who experienced business and personal disruptions due to the COVID-19 pandemic by providing interest-only modifications, loan payment deferrals, and extended amortization modifications. In accordance with interagency regulatory guidance and the CARES Act, qualifying loans modified in response to the COVID-19 pandemic are not considered troubled debt restructurings. The Company had 19 modified loans totaling $33.9 million outstanding as of June 30, 2021, representing 1.4% of the total loan portfolio, excluding PPP loans.

The following table presents a rollforward of loan modification activity, by modification type, from March 31, 2021 to June 30, 2021:

 

 

 

 

 

(dollars in thousands)

Interest-Only

Payment Deferral

Extended Amortization

Total

Principal Balance - March 31, 2021

$

31,663

 

$

618

 

$

4,802

 

$

37,083

 

Modification Expired

 

(4,139

)

 

(618

)

 

 

 

(4,757

)

Additional Modification Granted

 

1,173

 

 

 

 

 

 

1,173

 

New Modifications

 

468

 

 

 

 

 

 

468

 

Net Principal Advances (Payments)

 

(6

)

 

 

 

(24

)

 

(30

)

Principal Balance - June 30, 2021

$

29,159

 

$

 

$

4,778

 

$

33,937

 

About the Company

Bridgewater Bancshares, Inc. (Nasdaq: BWB) is a St. Louis Park, Minnesota-based financial holding company. Bridgewater's banking subsidiary, Bridgewater Bank, is a premier, full-service Twin Cities bank dedicated to serving the diverse needs of commercial real estate investors, entrepreneurs, business clients and high-net-worth individuals. By pairing a range of deposit, lending and business services solutions with a responsive service model, Bridgewater has seen continuous growth and profitability. With total assets of $3.2 billion and seven branches as of June 30, 2021, Bridgewater is considered one of the largest locally led banks in the State of Minnesota, and has received numerous awards for its growth, banking services and esteemed corporate culture.

Use of Non-GAAP financial measures

In addition to the results presented in accordance with U.S. Generally Accepted Accounting Principles (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 earnings release to the comparable GAAP measures are provided in the accompanying tables.

Forward-Looking Statements

This earnings release contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, statements concerning plans, estimates, calculations, forecasts and projections with respect to the anticipated future performance of the Company. These statements are often, but not always, identified by words such as “may”, “might”, “should”, “could”, “predict”, “potential”, “believe”, “expect”, “continue”, “will”, “anticipate”, “seek”, “estimate”, “intend”, “plan”, “projection”, “would”, “annualized”, “target” and “outlook”, or the negative version of those words or other comparable words of a future or forward-looking nature.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: the negative effects of the COVID-19 pandemic, including its effects on the economic environment, our clients and our operations, as well as any changes to federal, state or local government laws, regulations or orders in connection with the pandemic; loan concentrations in our portfolio; the overall health of the local and national real estate market; our ability to successfully manage credit risk; business and economic conditions generally and in the financial services industry, nationally and within our market area; our ability to maintain an adequate level of allowance for loan losses; new or revised accounting standards, including as a result of the future implementation of the Current Expected Credit Loss standard; the concentration of large loans to certain borrowers; the concentration of large deposits from certain clients; our ability to successfully manage liquidity risk; our dependence on non-core funding sources and our cost of funds; our ability to raise additional capital to implement our business plan; our ability to implement our growth strategy and manage costs effectively; developments and uncertainty related to the future use and availability of some reference rates, such as the London Interbank Offered Rate, as well as other alternative reference rates; the composition of our senior leadership team and our ability to attract and retain key personnel; the occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-related incidents; interruptions involving our information technology and telecommunications systems or third-party servicers; competition in the financial services industry; the effectiveness of our risk management framework; the commencement and outcome of litigation and other legal proceedings and regulatory actions against us; the impact of recent and future legislative and regulatory changes; interest rate risk; fluctuations in the values of the securities held in our securities portfolio; the imposition of tariffs or other governmental policies impacting the value of products produced by our commercial borrowers; severe weather, natural disasters, wide spread disease or pandemics (including the COVID-19 pandemic), acts of war or terrorism or other adverse external events; potential impairment to the goodwill we recorded in connection with our past acquisition; changes to U.S. tax laws, regulations and guidance; and any other risks described in the “Risk Factors” sections of reports filed by the Company with the Securities and Exchange Commission.

Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

Bridgewater Bancshares, Inc. and Subsidiaries

Consolidated Balance Sheets

(dollars in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

June 30,

 

 

2021

 

2020

 

2020

 

 

(Unaudited)

 

 

 

 

(Unaudited)

ASSETS

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents

 

$

92,197

 

$

160,675

 

$

178,428

Bank-Owned Certificates of Deposit

 

 

2,368

 

 

2,860

 

 

2,895

Securities Available for Sale, at Fair Value

 

 

402,786

 

 

390,629

 

 

326,295

Loans, Net of Allowance for Loan Losses of $37,591 at June 30, 2021 (unaudited), $34,841 at December 31, 2020 and $27,633 at June 30, 2020 (unaudited)

 

 

2,545,145

 

 

2,282,436

 

 

2,155,858

Federal Home Loan Bank (FHLB) Stock, at Cost

 

 

5,832

 

 

5,027

 

 

8,617

Premises and Equipment, Net

 

 

50,177

 

 

50,987

 

 

43,062

Accrued Interest

 

 

8,728

 

 

9,172

 

 

8,267

Goodwill

 

 

2,626

 

 

2,626

 

 

2,626

Other Intangible Assets, Net

 

 

574

 

 

670

 

 

765

Other Assets

 

 

52,179

 

 

22,263

 

 

27,650

Total Assets

 

$

3,162,612

 

$

2,927,345

 

$

2,754,463

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

Noninterest Bearing

 

$

758,023

 

$

671,903

 

$

648,869

Interest Bearing

 

 

1,962,883

 

 

1,829,733

 

 

1,593,182

Total Deposits

 

 

2,720,906

 

 

2,501,636

 

 

2,242,051

Notes Payable

 

 

 

 

11,000

 

 

12,000

FHLB Advances

 

 

57,500

 

 

57,500

 

 

147,500

Subordinated Debentures, Net of Issuance Costs

 

 

73,913

 

 

73,739

 

 

73,658

Accrued Interest Payable

 

 

2,654

 

 

1,615

 

 

1,953

Other Liabilities

 

 

16,809

 

 

16,450

 

 

20,111

Total Liabilities

 

 

2,871,782

 

 

2,661,940

 

 

2,497,273

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

Preferred Stock- $0.01 par value

 

 

 

 

 

 

 

 

 

Authorized 10,000,000; None Issued and Outstanding at June 30, 2021 (unaudited), December 31, 2020 and June 30, 2020 (unaudited)

 

 

 

 

 

 

Common Stock- $0.01 par value

 

 

 

 

 

 

 

 

 

Common Stock - Authorized 75,000,000; Issued and Outstanding 28,162,777 at June 30, 2021 (unaudited), 28,143,493 at December 31, 2020 and 28,837,560 at June 30, 2020 (unaudited)

 

 

282

 

 

281

 

 

288

Additional Paid-In Capital

 

 

104,811

 

 

103,714

 

 

110,906

Retained Earnings

 

 

176,495

 

 

154,831

 

 

142,678

Accumulated Other Comprehensive Income

 

 

9,242

 

 

6,579

 

 

3,318

Total Shareholders' Equity

 

 

290,830

 

 

265,405

 

 

257,190

Total Liabilities and Equity

 

$

3,162,612

 

$

2,927,345

 

$

2,754,463

Bridgewater Bancshares, Inc. and Subsidiaries

Consolidated Statements of Income

(dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

March 31,

 

June 30,

 

June 30,

 

June 30,

 

 

2021

 

2021

 

2020

 

2021

 

2020

 

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, Including Fees

 

$

28,748

 

$

27,908

 

$

25,913

 

$

56,656

 

$

51,026

Investment Securities

 

 

2,312

 

 

2,420

 

 

2,091

 

 

4,732

 

 

4,287

Other

 

 

87

 

 

112

 

 

162

 

 

199

 

 

321

Total Interest Income

 

 

31,147

 

 

30,440

 

 

28,166

 

 

61,587

 

 

55,634

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

3,513

 

 

3,671

 

 

5,170

 

 

7,184

 

 

10,894

Notes Payable

 

 

 

 

61

 

 

111

 

 

61

 

 

226

FHLB Advances

 

 

228

 

 

228

 

 

1,064

 

 

456

 

 

2,091

Subordinated Debentures

 

 

1,112

 

 

1,085

 

 

479

 

 

2,197

 

 

872

Federal Funds Purchased

 

 

6

 

 

 

 

 

 

6

 

 

107

Total Interest Expense

 

 

4,859

 

 

5,045

 

 

6,824

 

 

9,904

 

 

14,190

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INTEREST INCOME

 

 

26,288

 

 

25,395

 

 

21,342

 

 

51,683

 

 

41,444

Provision for Loan Losses

 

 

1,600

 

 

1,100

 

 

3,000

 

 

2,700

 

 

5,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

 

 

24,688

 

 

24,295

 

 

18,342

 

 

48,983

 

 

36,344

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer Service Fees

 

 

231

 

 

234

 

 

135

 

 

465

 

 

375

Net Gain on Sales of Available for Sale Securities

 

 

702

 

 

 

 

1,361

 

 

702

 

 

1,364

Other Income

 

 

670

 

 

774

 

 

481

 

 

1,444

 

 

1,957

Total Noninterest Income

 

 

1,603

 

 

1,008

 

 

1,977

 

 

2,611

 

 

3,696

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and Employee Benefits

 

 

7,512

 

 

7,102

 

 

6,348

 

 

14,614

 

 

12,802

Occupancy and Equipment

 

 

980

 

 

1,055

 

 

672

 

 

2,035

 

 

1,385

Other Expense

 

 

2,985

 

 

2,766

 

 

3,691

 

 

5,751

 

 

6,270

Total Noninterest Expense

 

 

11,477

 

 

10,923

 

 

10,711

 

 

22,400

 

 

20,457

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE INCOME TAXES

 

 

14,814

 

 

14,380

 

 

9,608

 

 

29,194

 

 

19,583

Provision for Income Taxes

 

 

3,821

 

 

3,709

 

 

2,010

 

 

7,530

 

 

4,542

NET INCOME

 

$

10,993

 

$

10,671

 

$

7,598

 

$

21,664

 

$

15,041

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EARNINGS PER SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.39

 

$

0.38

 

$

0.26

 

$

0.77

 

$

0.52

Diluted

 

 

0.38

 

 

0.37

 

 

0.26

 

 

0.75

 

 

0.51

Dividends Paid Per Share

 

 

 

 

 

 

 

 

 

 

Bridgewater Bancshares, Inc. and Subsidiaries

Analysis of Average Balances, Yields and Rates (year-to-date)

(dollars in thousands, except per share data) (Unaudited)

   

 

 

For the Six Months Ended

 

 

June 30, 2021

 

June 30, 2020

 

 

Average

 

Interest

 

Yield/

 

Average

 

Interest

 

Yield/

 

 

Balance

 

& Fees

 

Rate

 

Balance

 

& Fees

 

Rate

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Interest Earning Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash Investments

 

$

96,724

 

$

67

 

 

0.14

%

 

$

69,267

 

$

96

 

 

0.28

%

Investment Securities:

 

 

 

 

 

 

 

 

 

 

 

 

Taxable Investment Securities

 

 

307,898

 

 

3,371

 

 

2.21

 

 

 

195,873

 

 

2,691

 

 

2.76

 

Tax-Exempt Investment Securities (1)

 

 

78,985

 

 

1,723

 

 

4.40

 

 

 

93,260

 

 

2,020

 

 

4.36

 

Total Investment Securities

 

 

386,883

 

 

5,094

 

 

2.66

 

 

 

289,133

 

 

4,711

 

 

3.28

 

Paycheck Protection Program Loans (2)

 

 

149,098

 

 

3,631

 

 

4.91

 

 

 

70,037

 

 

873

 

 

2.51

 

Loans (1)(2)

 

 

2,313,295

 

 

53,085

 

 

4.63

 

 

 

1,983,641

 

 

50,220

 

 

5.09

 

Total Loans

 

 

2,462,393

 

 

56,716

 

 

4.64

 

 

 

2,053,678

 

 

51,093

 

 

5.00

 

Federal Home Loan Bank Stock

 

 

5,636

 

 

132

 

 

4.74

 

 

 

10,370

 

 

225

 

 

4.37

 

Total Interest Earning Assets

 

 

2,951,636

 

 

62,009

 

 

4.24

%

 

 

2,422,448

 

 

56,125

 

 

4.66

%

Noninterest Earning Assets

 

 

57,228

 

 

 

 

 

 

47,208

 

 

 

 

Total Assets

 

$

3,008,864

 

 

 

 

 

$

2,469,656

 

 

 

 

Interest Bearing Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

Interest Bearing Transaction Deposits

 

$

392,732

 

$

942

 

 

0.48

%

 

$

259,704

 

$

808

 

 

0.63

%

Savings and Money Market Deposits

 

 

744,480

 

 

1,949

 

 

0.53

 

 

 

527,445

 

 

3,232

 

 

1.23

 

Time Deposits

 

 

338,497

 

 

2,341

 

 

1.39

 

 

 

382,256

 

 

4,299

 

 

2.26

 

Brokered Deposits

 

 

391,167

 

 

1,952

 

 

1.01

 

 

 

269,000

 

 

2,555

 

 

1.91

 

Total Interest Bearing Deposits

 

 

1,866,876

 

 

7,184

 

 

0.78

 

 

 

1,438,405

 

 

10,894

 

 

1.52

 

Federal Funds Purchased

 

 

4,993

 

 

6

 

 

0.24

 

 

 

12,422

 

 

107

 

 

1.74

 

Notes Payable

 

 

3,343

 

 

61

 

 

3.66

 

 

 

12,253

 

 

226

 

 

3.71

 

FHLB Advances

 

 

57,500

 

 

456

 

 

1.60

 

 

 

183,099

 

 

2,091

 

 

2.30

 

Subordinated Debentures

 

 

73,819

 

 

2,197

 

 

6.00

 

 

 

27,986

 

 

872

 

 

6.27

 

Total Interest Bearing Liabilities

 

 

2,006,531

 

 

9,904

 

 

1.00

%

 

 

1,674,165

 

 

14,190

 

 

1.70

%

Noninterest Bearing Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest Bearing Transaction Deposits

 

 

704,391

 

 

 

 

 

 

523,828

 

 

 

 

Other Noninterest Bearing Liabilities

 

 

18,384

 

 

 

 

 

 

18,708

 

 

 

 

Total Noninterest Bearing Liabilities

 

 

722,775

 

 

 

 

 

 

542,536

 

 

 

 

Shareholders' Equity

 

 

279,558

 

 

 

 

 

 

252,955

 

 

 

 

Total Liabilities and Shareholders' Equity

 

$

3,008,864

 

 

 

 

 

$

2,469,656

 

 

 

 

Net Interest Income / Interest Rate Spread

 

 

 

 

52,105

 

 

3.24

%

 

 

 

 

41,935

 

 

2.96

%

Net Interest Margin (3)

 

 

 

 

 

3.56

%

 

 

 

 

 

3.48

%

Taxable Equivalent Adjustment:

 

 

 

 

 

 

 

 

 

 

 

 

Tax-Exempt Investment Securities and Loans

 

 

 

 

(422

)

 

 

 

 

 

 

(491

)

 

 

Net Interest Income

 

 

 

$

51,683

 

 

 

 

 

 

$

41,444

 

 

 

_________________________________

(1)

Interest income and average rates for tax-exempt investment securities and loans are presented on a tax-equivalent basis, assuming a statutory 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.

Non-GAAP Financial Measures

(dollars in thousands) (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

For the Six Months Ended

 

 

June 30,

 

March 31,

 

June 30,

 

June 30,

 

June 30,

 

 

2021

 

2021

 

2020

 

2021

 

2020

Pre-Provision Net Revenue

 

 

 

 

 

 

 

 

 

 

Noninterest Income

 

$

1,603

 

 

$

1,008

 

 

$

1,977

 

 

$

2,611

 

 

$

3,696

 

Less: Gain on sales of Securities

 

 

(702

)

 

 

 

 

 

(1,361

)

 

 

(702

)

 

 

(1,364

)

Total Operating Noninterest Income

 

 

901

 

 

 

1,008

 

 

 

616

 

 

 

1,909

 

 

 

2,332

 

Plus: Net Interest income

 

 

26,288

 

 

 

25,395

 

 

 

21,342

 

 

 

51,683

 

 

 

41,444

 

Net Operating Revenue

 

$

27,189

 

 

$

26,403

 

 

$

21,958

 

 

$

53,592

 

 

$

43,776

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest Expense

 

$

11,477

 

 

$

10,923

 

 

$

10,711

 

 

$

22,400

 

 

$

20,457

 

Less: Amortization of Tax Credit Investments

 

 

(140

)

 

 

(118

)

 

 

(362

)

 

 

(258

)

 

 

(447

)

Less: FHLB Advance Prepayment Fees

 

 

 

 

 

 

 

 

(1,430

)

 

 

 

 

 

(1,430

)

Total Operating Noninterest Expense

 

$

11,337

 

 

$

10,805

 

 

$

8,919

 

 

$

22,142

 

 

$

18,580

 

 

 

 

 

 

 

 

 

 

 

 

Pre-Provision Net Revenue

 

$

15,852

 

 

$

15,598

 

 

$

13,039

 

 

$

31,450

 

 

$

25,196

 

 

 

 

 

 

 

 

 

 

 

 

Plus:

 

 

 

 

 

 

 

 

 

 

Non-Operating Revenue Adjustments

 

 

702

 

 

 

 

 

 

1,361

 

 

 

702

 

 

 

1,364

 

Less:

 

 

 

 

 

 

 

 

 

 

Provision for Loan Losses

 

 

1,600

 

 

 

1,100

 

 

 

3,000

 

 

 

2,700

 

 

 

5,100

 

Non-Operating Expense Adjustments

 

 

140

 

 

 

118

 

 

 

1,792

 

 

 

258

 

 

 

1,877

 

Provision for Income Taxes

 

 

3,821

 

 

 

3,709

 

 

 

2,010

 

 

 

7,530

 

 

 

4,542

 

Net Income

 

$

10,993

 

 

$

10,671

 

 

$

7,598

 

 

$

21,664

 

 

$

15,041

 

 

 

 

 

 

 

 

 

 

 

 

Average Assets

 

$

3,076,712

 

 

$

2,940,262

 

 

$

2,622,272

 

 

$

3,008,864

 

 

$

2,469,656

 

Pre-Provision Net Revenue Return on Average Assets

 

 

2.07

%

 

 

2.15

%

 

 

2.00

%

 

 

2.11

%

 

 

2.05

%

 

 

As of and for the Three Months Ended

 

As of and for the Six Months Ended

 

 

June 30,

 

March 31

 

June 30,

 

June 30,

 

June 30,

 

 

2021

 

2021

 

2020

 

2021

 

2020

Core Net Interest Margin

 

 

 

 

 

 

 

 

 

 

Net Interest Income (Tax-Equivalent Basis)

 

$

26,495

 

 

$

25,609

 

 

$

21,581

 

 

$

52,105

 

 

$

41,935

 

Less: Loan Fees

 

 

(1,023

)

 

 

(1,202

)

 

 

(1,264

)

 

 

(2,225

)

 

 

(2,571

)

Less: PPP Interest and Fees

 

 

(1,767

)

 

 

(1,864

)

 

 

(873

)

 

 

(3,631

)

 

 

(873

)

Core Net Interest Income

 

$

23,705

 

 

$

22,543

 

 

$

19,444

 

 

$

46,249

 

 

$

38,491

 

 

 

 

 

 

 

 

 

 

 

 

Average Interest Earning Assets

 

 

3,019,437

 

 

 

2,883,084

 

 

 

2,567,292

 

 

 

2,951,636

 

 

 

2,422,448

 

Less: Average PPP Loans

 

 

(149,312

)

 

 

(148,881

)

 

 

(139,235

)

 

 

(149,098

)

 

 

(70,037

)

Core Average Interest Earning Assets

 

$

2,870,125

 

 

$

2,734,203

 

 

$

2,428,057

 

 

$

2,802,538

 

 

$

2,352,411

 

Core Net Interest Margin

 

 

3.31

%

 

 

3.34

%

 

 

3.22

%

 

 

3.33

%

 

 

3.29

%

Non-GAAP Financial Measures

(dollars in thousands) (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

For the Six Months Ended

 

 

June 30,

 

March 31,

 

June 30,

 

June 30,

 

June 30,

 

 

2021

 

2021

 

2020

 

2021

 

2020

Efficiency Ratio

 

 

 

 

 

 

 

 

 

 

Noninterest Expense

 

$

11,477

 

 

$

10,923

 

 

$

10,711

 

 

$

22,400

 

 

$

20,457

 

Less: Amortization of Intangible Assets

 

 

(47

)

 

 

(48

)

 

 

(47

)

 

 

(95

)

 

 

(95

)

Adjusted Noninterest Expense

 

$

11,430

 

 

$

10,875

 

 

$

10,664

 

 

$

22,305

 

 

$

20,362

 

Net Interest Income

 

 

26,288

 

 

 

25,395

 

 

 

21,342

 

 

 

51,683

 

 

 

41,444

 

Noninterest Income

 

 

1,603

 

 

 

1,008

 

 

 

1,977

 

 

 

2,611

 

 

 

3,696

 

Less: Gain on Sales of Securities

 

 

(702

)

 

 

 

 

 

(1,361

)

 

 

(702

)

 

 

(1,364

)

Adjusted Operating Revenue

 

$

27,189

 

 

$

26,403

 

 

$

21,958

 

 

$

53,592

 

 

$

43,776

 

Efficiency Ratio

 

 

42.0

%

 

 

41.2

%

 

 

48.6

%

 

 

41.6

%

 

 

46.5

%

 

 

 

 

 

 

 

 

 

 

 

Adjusted Efficiency Ratio

 

 

 

 

 

 

 

 

 

 

Noninterest Expense

 

$

11,477

 

 

$

10,923

 

 

$

10,711

 

 

$

22,400

 

 

$

20,457

 

Less: Amortization of Tax Credit Investments

 

 

(140

)

 

 

(118

)

 

 

(362

)

 

 

(258

)

 

 

(447

)

Less: FHLB Advance Prepayment Fees

 

 

 

 

 

 

 

 

(1,430

)

 

 

 

 

 

(1,430

)

Less: Amortization of Intangible Assets

 

 

(47

)

 

 

(48

)

 

 

(47

)

 

 

(95

)

 

 

(95

)

Adjusted Noninterest Expense

 

$

11,290

 

 

$

10,757

 

 

$

8,872

 

 

$

22,047

 

 

$

18,485

 

Net Interest Income

 

 

26,288

 

 

 

25,395

 

 

 

21,342

 

 

 

51,683

 

 

 

41,444

 

Noninterest Income

 

 

1,603

 

 

 

1,008

 

 

 

1,977

 

 

 

2,611

 

 

 

3,696

 

Less: Gain on Sales of Securities

 

 

(702

)

 

 

 

 

 

(1,361

)

 

 

(702

)

 

 

(1,364

)

Adjusted Operating Revenue

 

$

27,189

 

 

$

26,403

 

 

$

21,958

 

 

$

53,592

 

 

$

43,776

 

Adjusted Efficiency Ratio

 

 

41.5

%

 

 

40.7

%

 

 

40.4

%

 

 

41.1

%

 

 

42.2

%

 

 

For the Three Months Ended

 

For the Six Months Ended

 

 

June 30,

 

March 31