Bridgewater Bancshares, Inc. Announces First Quarter 2019 Earnings

April 25, 2019 7:05 AM | 181 min read | Make a Comment
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Bridgewater Bancshares, Inc. BWB (the Company), the parent company of Bridgewater Bank (the Bank), today announced net income of $7.0 million for the first quarter of 2019, an 18.0% increase over net income of $6.0 million for the first quarter of 2018. Net income per diluted common share for the first quarter of 2019 was $0.23, which was equal to net income per diluted common share in the same period in 2018, due to the impact of the issuance of shares in connection with the Company's initial public offering in March of 2018.

"Bridgewater is off to a strong start in 2019," noted Chairman, Chief Executive Officer, and President, Jerry Baack. "We are particularly pleased with our controlled loan growth of $59 million, or 14% on an annualized basis, and very strong deposit generation of $83 million, or 21% on an annualized basis. While our market remains fiercely competitive with regional players continuing to enter, our deposit growth initiatives have never been stronger. New client relationships continue to be attracted to our local leadership and simple solutions."

First Quarter 2019 Financial Results

         
Basic Diluted Adjusted Tangible book
ROA ROE Earnings per share Earnings per share Efficiency ratio (1) value per share (2)
1.42 % 12.60 % $ 0.23 $ 0.23 43.1 % $ 7.58
     
(1)   Ratio excludes the amortization of tax credit investments and represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details.
(2) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details.
 

Highlights

  • Net income was $7.0 million for the first quarter of 2019 compared to $6.0 million for the first quarter of 2018, an increase of 18.0%.
  • Diluted earnings per common share was $0.23 for the first quarter of 2019, which was equal to the first quarter of 2018, due to the impact of the issuance of shares in connection with the Company's initial public offering in March of 2018.
  • Tangible book value per share, a non-GAAP financial measure, increased 5.0%, or $0.36, to $7.58 at March 31, 2019, compared to $7.22 at December 31, 2018. Year-over-year tangible book value per share increased 16.7%, or $1.09.
  • Annualized return on average assets (ROA) and return on average common equity (ROE) for the first quarter of 2019 were 1.42% and 12.60%, respectively, compared to annualized ROA and ROE of 1.48% and 16.16%, respectively, for the first quarter of 2018.
  • Gross loans increased $58.7 million, or 14.1% on an annualized basis, to $1.72 billion in the first quarter of 2019. Year-over-year gross loans increased $318.2 million, or 22.6%.
  • Deposits increased $82.7 million, or 21.2% on an annualized basis, to $1.64 billion in the first quarter of 2019. Year-over-year deposits increased $290.6 million, or 21.5%.
  • Nonperforming assets to total assets remained the same at 0.08% for the first quarter of 2019 compared to the first quarter of 2018.
  • Adjusted efficiency ratio, a non-GAAP financial measure which excludes the impact of the amortization of tax credit investments from noninterest expense, was 43.1% for the first quarter of 2019, compared to 42.8% for the first quarter of 2018.

Key Financial Measures

       
 
As of and for the Three Months Ended As of and for the Three Months Ended
March 31, December 31, March 31, March 31,
2019 2018 2019 2018
Per Common Share Data (1)
Basic Earnings Per Share $ 0.23 $ 0.26 $ 0.23 $ 0.23
Diluted Earnings Per Share 0.23 0.25 0.23 0.23
Book Value Per Share 7.70 7.34 7.70 6.62
Tangible Book Value Per Share (2) 7.58 7.22 7.58 6.49
Basic Weighted Average Shares Outstanding 30,097,638 30,072,003 30,097,638 25,755,764
Diluted Weighted Average Shares Outstanding 30,706,736 30,506,824 30,706,736 26,171,433
Shares Outstanding at Period End 30,097,674 30,097,274 30,097,674 30,059,374
 
Selected Performance Ratios
Return on Average Assets (Annualized) 1.42 % 1.58 % 1.42 % 1.48 %
Return on Average Common Equity (Annualized) 12.60 14.30 12.60 16.16
Return on Average Tangible Common Equity (Annualized) (2) 12.81 14.55 12.81 16.59
Yield on Interest Earning Assets 4.99 4.96 4.99 4.76
Yield on Total Loans, Gross 5.27 5.27 5.27 5.11
Cost of Interest Bearing Liabilities 2.06 1.92 2.06 1.37
Cost of Total Deposits 1.46 1.32 1.46 0.92
Net Interest Margin (3) 3.54 3.62 3.54 3.77
Efficiency Ratio (2) 44.1 60.0 44.1 42.8
Adjusted Efficiency Ratio (4) 43.1 42.1 43.1 42.8
Noninterest Expense to Average Assets (Annualized) 1.59 2.25 1.59 1.61
Adjusted Noninterest Expense to Average Assets (Annualized) (4) 1.55 1.58 1.55 1.61
Loan to Deposit Ratio 104.9 106.7 104.9 103.9
Core Deposits to Total Deposits 75.8 74.2 75.8 74.5
Tangible Common Equity to Tangible Assets (2) 11.16 11.03 11.16 11.64
 
Capital Ratios (Bank Only)
Tier 1 Leverage Ratio 10.88 % 10.82 % 10.88 % 11.51 %
Tier 1 Risk-based Capital Ratio 11.71 11.63 11.71 12.67
Total Risk-based Capital Ratio 12.83 12.76 12.83 13.86
 
(1)   Includes shares of common stock and non-voting common stock. On October 25, 2018, the Company exchanged shares of common stock for all of the outstanding shares of non-voting common stock. Following the exchange, no shares of non-voting common stock were outstanding.
(2) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details.
(3) Amounts calculated on a tax-equivalent basis using the statutory federal tax rate of 21%.
(4) Ratio excludes the amortization of tax credit investments and represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details.
 

Selected Financial Data

           
 
March 31, December 31, March 31, March 31,
(dollars in thousands) 2019 2018 % Change 2019 2018 % Change
Selected Balance Sheet Data
Total Assets $ 2,048,111 $ 1,973,741 3.8 % $ 2,048,111 $ 1,681,597 21.8 %
Total Loans, Gross 1,723,629 1,664,931 3.5 1,723,629 1,405,420 22.6
Allowance for Loan Losses 20,607 20,031 2.9 20,607 17,121 20.4
Goodwill and Other Intangibles 3,630 3,678 (1.3 ) 3,630 3,821 (5.0 )
 
Deposits 1,643,666 1,560,934 5.3 1,643,666 1,353,036 21.5
Tangible Common Equity (1) 228,145 217,320 5.0 228,145 195,218 16.9
Total Shareholders' Equity 231,775 220,998 4.9 231,775 199,039 16.4
Average Total Assets - Quarter-to-Date 2,011,174 1,948,909 3.2 2,011,174 1,625,749 23.7
Average Common Equity - Quarter-to-Date 225,844 215,254 4.9 225,844 149,318 51.3
 

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

           
For the Three Months Ended For the Three Months Ended
March 31, December 31, March 31, March 31,
(dollars in thousands) 2019 2018 % Change 2019 2018 % Change
Selected Income Statement Data
Interest Income

$

24,267

$

23,988 1.2 % $ 24,267 $ 18,710 29.7 %
Interest Expense   7,136   6,546   9.0   7,136   3,947 80.8
Net Interest Income   17,131   17,442   (1.8 )   17,131   14,763 16.0
Provision for Loan Losses   600   800   (25.0 )   600   600 -
Net Interest Income after Provision for Loan Losses 16,531 16,642 (0.7 ) 16,531 14,163 16.7
Noninterest Income 634 857 (26.0 ) 634 387 63.8
Noninterest Expense   7,885   11,040   (28.6 )   7,885   6,532 20.7
Income Before Income Taxes 9,280 6,459 43.7 9,280 8,018 15.7
Provision (Benefit) for Income Taxes   2,262   (1,302 ) 273.7   2,262   2,068 9.4
Net Income $ 7,018 $ 7,761   (9.6 ) $ 7,018 $ 5,950 17.9
 

Income Statement

Net Interest Income

Net interest income was $17.1 million for the first quarter of 2019, a decrease of $311,000, or 1.8%, from $17.4 million in the fourth quarter of 2018, and an increase of $2.4 million, or 16.0%, from $14.8 million in the first quarter of 2018. The linked-quarter decrease in net interest income was due to continued pressure from rising deposit and borrowing costs, as well as decreased loan fees recognized during the period. The year-over-year increase in net interest income was largely attributable to growth in average interest earning assets, which increased by 23.4% to $1.99 billion for the first quarter of 2019, from $1.61 billion for the first quarter of 2018. This increase in average interest earning assets was primarily due to continued organic growth in the loan portfolio.

Net interest margin (on a fully tax-equivalent basis) for the first quarter of 2019 was 3.54%, a decrease from 3.62% in the fourth quarter of 2018 and from 3.77% in the first quarter of 2018. While net interest margin has benefitted from the repricing of variable-rate loans and the origination of new loans at higher rates, it compressed due to decreased loan fees recognized and increased rates on deposits and borrowings.

Interest income was $24.3 million for the first quarter of 2019, an increase of $279,000, or 1.2%, from $24.0 million in the fourth quarter of 2018, and an increase of $5.6 million, or 29.7%, from $18.7 million in the first quarter of 2018. The yield on interest earning assets (on a fully tax-equivalent basis) rose to 4.99% in the first quarter of 2019, compared to 4.96% in the fourth quarter of 2018 and 4.76% in the first quarter of 2018.

Loan interest income and loan fees remain the primary contributing factors to the increase in yield on interest earning assets, driving the aggregate loan yield 16 basis points higher from 5.11% in the first quarter of 2018 to 5.27% in the fourth quarter of 2018 and 5.27% in the first quarter of 2019. As the composition of the aggregate loan yield has shifted, solid loan growth at yields accretive to the existing portfolio yield has enabled the Company to offset the decrease in loan fee income. While deferred loan fees are regularly amortized into income, fluctuations in the level of loan fees recognized can vary based on prepayments and other factors. In addition, in an effort to manage loan growth commensurate with deposit growth, the Company was more active in participating new loan originations, which resulted in sharing loan fees and subsequently reducing the amount of loan fees that would otherwise contribute to the aggregate loan yield.

A summary of interest and fees recognized on loans for the dates indicated is as follows:

           
Three Months Ended
March 31, 2019 December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018
Interest 5.07 % 4.98 % 4.87 % 4.80 % 4.74 %
Fees 0.20 0.29 0.38 0.49 0.37
Yield on Loans 5.27 % 5.27 % 5.25 % 5.29 % 5.11 %
 

Interest expense was $7.1 million for the first quarter of 2019, an increase of $590,000, or 9.0%, from $6.5 million in the fourth quarter of 2018, and an increase of $3.2 million, or 80.8%, from $3.9 million in the first quarter of 2018. The cost of interest bearing liabilities increased to 2.06% in the first quarter of 2019 from 1.92% in the fourth quarter of 2018, and 1.37% in the first quarter of 2018. The increase is due to higher costs and repricing of deposits and borrowings during both periods.

A summary of the Company's average balances, interest yields and rates, and net interest margin for the three months ended March 31, 2019, December 31, 2018, and March 31, 2018 is as follows:

                 
For the Three Months Ended
March 31, 2019 December 31, 2018 March 31, 2018
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 $ 27,945 $ 87 1.27 % $ 21,249 $ 63 1.18 % $ 21,693 $ 49 0.92 %
Investment Securities:
Taxable Investment Securities 138,397 973 2.85 140,858 918 2.59 119,218 633 2.15
Tax-Exempt Investment Securities (1)   110,463   1,173   4.31   114,356   1,196   4.15   114,828   1,183   4.18
Total Investment Securities 248,860 2,146 3.50 255,214 2,114 3.29 234,046 1,816 3.15
Loans (2) 1,707,908 22,179 5.27 1,654,415 21,978 5.27 1,353,031 17,048 5.11
Federal Home Loan Bank Stock   7,911   100   5.12   7,759   83   4.24   5,393   45   3.38
Total Interest Earning Assets 1,992,624 24,512 4.99 % 1,938,637 24,238 4.96 % 1,614,163 18,958 4.76 %
Noninterest Earning Assets   18,550   10,272   11,586
Total Assets $ 2,011,174 $ 1,948,909 $ 1,625,749
Interest Bearing Liabilities:
Interest Bearing Transaction Deposits 181,033 232 0.52 % 173,825 197 0.45 % 168,509 113 0.27 %
Savings and Money Market Deposits 414,811 1,766 1.73 426,185 1,675 1.56 354,009 756 0.87
Time Deposits 329,511 1,880 2.31 301,372 1,633 2.15 298,333 1,223 1.66
Brokered Deposits 292,067 1,825 2.53 265,523 1,614 2.41 211,058 917 1.76
Federal Funds Purchased 24,956 160 2.59 50,228 315 2.49 28,511 118 1.68
Notes Payable 14,500 121 3.38 15,000 152 4.02 16,500 152 3.74
FHLB Advances 124,000 775 2.54 95,467 559 2.32 68,278 299 1.78
Subordinated Debentures   24,647   377   6.20   24,621   401   6.46   24,544   369   6.10
Total Interest Bearing Liabilities 1,405,525 7,136 2.06 % 1,352,221 6,546 1.92 % 1,169,742 3,947 1.37 %
Noninterest Bearing Liabilities:
Noninterest Bearing Transaction Deposits 369,912 370,792 295,587
Other Noninterest Bearing Liabilities   9,893   10,642   11,102
Total Noninterest Bearing Liabilities 379,805 381,434 306,689
Shareholders' Equity   225,844   215,254   149,318
Total Liabilities and Shareholders' Equity $ 2,011,174 $ 1,948,909 $ 1,625,749
Net Interest Income / Interest Rate Spread 17,376 2.93 % 17,692 3.04 % 15,011 3.39 %
Net Interest Margin (3) 3.54 % 3.62 % 3.77 %
Taxable Equivalent Adjustment:
Tax-Exempt Investment Securities   (245 )   (250 )   (248 )
Net Interest Income $ 17,131   $ 17,442   $ 14,763  
 
(1)   Interest income and average rates for tax-exempt investment securities 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

A reconciliation of the Company's allowance for loan losses for the three months ended March 31, 2019, December 31, 2018 and March 31, 2018 is as follows:

       
Three Months Ended Three Months Ended
March 31, December 31, March 31, March 31,
(dollars in thousands) 2019 2018 2019 2018
Balance at Beginning of Period $ 20,031 $ 18,949 $ 20,031 $ 16,502
Provision for Loan Losses 600 800 600 600
Charge-offs (36 ) (37 ) (36 ) (12 )
Recoveries   12     319     12     31  
Balance at End of Period $ 20,607   $ 20,031   $ 20,607   $ 17,121  
 

Noninterest Income

Noninterest income was $634,000 for the first quarter of 2019, a decrease of $223,000 from $857,000 for the fourth quarter of 2018, and an increase of $247,000 from $387,000 for the first quarter of 2018.

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

             
Three Months Ended Three Months Ended
March 31, December 31, Increase/ March 31, March 31, Increase/
(dollars in thousands) 2019 2018 (Decrease)   2019 2018 (Decrease)
Noninterest Income:
Customer Service Fees $ 191 $ 206 $ (15 ) $ 191 $ 170 $ 21
Net Gain (Loss) on Sales of Securities (5 ) (17 ) 12 (5 ) — (5 )
Net Gain (Loss) on Sales of Foreclosed Assets — — — — 4 (4 )
Letter of Credit Fees 246 482 (236 ) 246 70 176
Debit Card Interchange Fees 88 104 (16 ) 88 92 (4 )
Other Income   114     82     32       114     51   63  
Totals $ 634   $ 857   $ (223 )   $ 634   $ 387 $ 247  
 

Noninterest Expense

Noninterest expense was $7.9 million for the first quarter of 2019, a decrease of $3.2 million from $11.0 million for the fourth quarter of 2018, and an increase of $1.4 million from $6.5 million for the first quarter of 2018. The decrease from the fourth quarter of 2018 was primarily driven by a $3.1 million reduction in the amortization of tax credit investments. The increase from the first quarter of 2018 was attributed to investments in employees, technology, marketing, and other operating costs to meet the needs of the Company's growth.

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

             
Three Months Ended Three Months Ended
March 31, December 31, Increase/ March 31, March 31, Increase/
(dollars in thousands) 2019 2018 (Decrease)   2019 2018 (Decrease)
Noninterest Expense:
Salaries and Employee Benefits $ 4,802 $ 5,086 $ (284 ) $ 4,802 $ 4,318 $ 484
Occupancy and Equipment 656 584 72 656 574 82
FDIC Insurance Assessment 285 240 45 285 270 15
Data Processing 153 145 8 153 32 121
Professional and Consulting Fees 388 289 99 388 301 87
Information Technology and Telecommunications 236 258 (22 ) 236 183 53
Marketing and Advertising 465 431 34 465 284 181
Intangible Asset Amortization 48 48 — 48 48 —
Amortization of Tax Credit Investments 177 3,278 (3,101 ) 177 — 177
Other Expense   675   681   (6 )     675   522   153
Totals $ 7,885 $ 11,040 $ (3,155 )   $ 7,885 $ 6,532 $ 1,353
 
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The Company had 143 full-time equivalent employees at March 31, 2019, compared to 140 employees at December 31, 2018, and 118 employees at March 31, 2018. The increases include key strategic hires, particularly in deposit gathering roles, as the Company continues to capitalize on M&A disruption. While the recognition of tax credit investments creates volatility in the level of total noninterest expense and concurrently the efficiency ratio, it directly reduces income tax expense and the effective tax rate. The efficiency ratio, a non-GAAP financial measure, was 44.1% for the first quarter of 2019, compared to 60.0% for the fourth quarter of 2018, and 42.8% for the first quarter of 2018. Excluding the impact of the amortization of tax credit investments, the adjusted efficiency ratio, a non-GAAP financial measure, was 43.1% for the first quarter of 2019, 42.1% for the fourth quarter of 2018, and 42.8% for the first quarter of 2018.

Income Taxes

The effective combined federal and state income tax rate for the first quarter of 2019 was 24.4%, an increase from (20.2)% for the fourth quarter of 2018, and a decrease from 25.8% for the first quarter of 2018. The higher effective combined rate in the first quarter of 2019 compared to the fourth quarter of 2018 was primarily due to the recognition of $3.8 million of tax credit investments.

Balance Sheet

Total assets at March 31, 2019 were $2.05 billion, a 3.8% increase from $1.97 billion at December 31, 2018, and a 21.8% increase from $1.68 billion at March 31, 2018. The increase in total assets was primarily due to organic loan growth.

Total gross loans at March 31, 2019 were $1.72 billion, an increase of $58.7 million, or 3.5%, over total gross loans of $1.66 billion at December 31, 2018, and an increase of $318.2 million, or 22.6%, over total gross loans of $1.41 billion at March 31, 2018.

The following table details the composition of the Company's loan portfolio, by category, at the dates indicated:

         
March 31, 2019 December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018
(dollars in thousands)
Commercial and Industrial $ 284,807 $ 260,833 $ 235,502 $ 204,072 $ 199,262
Construction and Land Development 178,782 210,041 187,919 164,492 147,842
Real Estate Mortgage:
1 - 4 Family Mortgage 233,131 226,773 224,124 213,265 200,573
Multifamily 417,975 407,934 389,511 340,888 332,770
CRE Owner Occupied 66,130 64,458 65,905 65,891 67,512
CRE Nonowner Occupied   538,998   490,632   492,499   470,437   453,498
Total Real Estate Mortgage Loans 1,256,234 1,189,797 1,172,039 1,090,481 1,054,353
Consumer and Other   3,806   4,260   4,504   4,275   3,963
Total Loans, Gross 1,723,629 1,664,931 1,599,964 1,463,320 1,405,420
Allowance for Loan Losses (20,607) (20,031) (18,949) (17,666) (17,121)
Net Deferred Loan Fees   (4,791)   (4,515)   (4,308)   (4,058)   (4,130)
Total Loans, Net $ 1,698,231 $ 1,640,385 $ 1,576,707 $ 1,441,596 $ 1,384,169
 

Total deposits at March 31, 2019 were $1.64 billion, an increase of $82.7 million, or 5.3%, over total deposits of $1.56 billion at December 31, 2018, and an increase of $290.6 million, or 21.5%, over total deposits of $1.35 billion at March 31, 2018.

The following table details the composition of the Company's deposit portfolio, by category, at the dates indicated:

         
March 31, 2019 December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018
(dollars in thousands)
Noninterest Bearing Transaction Deposits $ 404,937 $ 369,203 $ 342,292 $ 323,320 $ 315,036
Interest Bearing Transaction Deposits 180,459 179,567 175,455 178,045 164,899
Savings and Money Market Deposits 434,186 402,639 416,140 381,942 339,541
Time Deposits 346,163 318,356 290,887 300,701 304,743
Brokered Deposits   277,921   291,169   254,314   230,683   228,817
Total Deposits $ 1,643,666 $ 1,560,934 $ 1,479,088 $ 1,414,691 $ 1,353,036
 

Total shareholders' equity at March 31, 2019 was $231.8 million, an increase of $10.8 million, or 4.9%, over total shareholders' equity of $221.0 million at December 31, 2018, and an increase of $32.8 million, or 16.4%, over total shareholders' equity of $199.0 million at March 31, 2018. The increase in total shareholders' equity was primarily due to net income retained.

Tangible book value per share, a non-GAAP financial measure, was $7.58 as of March 31, 2019, an increase of 5.0% from $7.22 as of December 31, 2018, and an increase of 16.7% from $6.49 as of March 31, 2018.

Asset Quality
Asset quality metrics for the Company remained strong at March 31, 2019. Annualized net charge-offs (recoveries) as a percent of average loans for the first quarter of 2019 were 0.01%, compared to (0.07)% for the fourth quarter of 2018, and (0.01)% for the first quarter of 2018. At March 31, 2019, the Company's nonperforming assets, which include nonaccrual loans and foreclosed assets, were $1.6 million, or 0.08% of total assets, as compared to $581,000, or 0.03% of total assets at December 31, 2018, and $1.4 million, or 0.08% of total assets at March 31, 2018.

About the Company

Bridgewater Bancshares, Inc. is a financial holding company headquartered in Bloomington, Minnesota. The Company has two wholly owned subsidiaries, Bridgewater Bank, a Minnesota-chartered commercial bank founded in November 2005, and Bridgewater Risk Management, Inc., a captive insurance company founded in December 2016. Bridgewater Bank has two wholly owned subsidiaries, Bridgewater Investment Management, Inc. and BWB Holdings, LLC. Bridgewater Bank currently operates through 7 branches in Bloomington, Greenwood, Minneapolis (2), St. Louis Park, Orono, and St. Paul, all located within the Minneapolis-St. Paul-Bloomington metropolitan statistical area.

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: 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; our high concentration of large loans to certain borrowers; 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; 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; and any other risks described in the "Risk Factors" sections of other 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)

 
March 31, December 31, March 31,
2019 2018 2018
(Unaudited) (Unaudited)
ASSETS
Cash and Cash Equivalents $ 48,750 $ 28,444 $ 20,125
Bank-Owned Certificates of Deposits 2,948 3,305 3,803
Securities Available for Sale, at Fair Value 250,285 253,378 236,819
Loans, Net of Allowance for Loan Losses of 20,607 at March 31, 2019, $20,031 at December 31, 2018 and $17,121 at March 31, 2018 1,698,231 1,640,385 1,384,169
Federal Home Loan Bank (FHLB) Stock, at Cost 7,324 7,614 5,214
Premises and Equipment, Net 15,697 13,074 10,151
Foreclosed Assets — — 288
Accrued Interest 7,058 6,589 5,753
Goodwill 2,626 2,626 2,626
Other Intangible Assets, Net 1,004 1,052 1,195
Other Assets   14,188   17,274     11,454  
Total Assets $ 2,048,111 $ 1,973,741   $ 1,681,597  
 
LIABILITIES AND EQUITY
LIABILITIES
Deposits:
Noninterest Bearing $ 404,937 $ 369,203 $ 315,036
Interest Bearing   1,238,729   1,191,731     1,038,000  
Total Deposits 1,643,666 1,560,934 1,353,036
Federal Funds Purchased — 18,000 9,000
Notes Payable 14,500 15,000 16,500
FHLB Advances 124,000 124,000 73,000
Subordinated Debentures, Net of Issuance Costs 24,656 24,630 24,552
Accrued Interest Payable 1,679 1,806 1,085
Other Liabilities   7,835   8,373     5,385  
Total Liabilities   1,816,336   1,752,743     1,482,558  
 
SHAREHOLDERS' EQUITY
Preferred Stock- $0.01 par value
Authorized 10,000,000; None Issued and Outstanding at March 31, 2019 (unaudited), December 31, 2018 and March 31, 2018 (unaudited) — — —
Common Stock- $0.01 par value
Common Stock - Authorized 75,000,000; Issued and Outstanding 30,097,674 at March 31, 2019 (unaudited), 30,097,274 at December 31, 2018 and 27,235,832 at March 31, 2018 (unaudited) 301 301 272
Non-voting Common Stock- Authorized 10,000,000; Issued and Outstanding -0- at March 31, 2019 (unaudited) and December 31, 2018 and 2,823,542 at March 31, 2018 (unaudited) — — 28
Additional Paid-In Capital 126,209 126,031 125,326
Retained Earnings 103,252 96,234 75,264
Accumulated Other Comprehensive Income (Loss)   2,013   (1,568 )   (1,851 )
Total Shareholders' Equity   231,775   220,998     199,039  
Total Liabilities and Equity $ 2,048,111 $ 1,973,741   $ 1,681,597  
 

Bridgewater Bancshares, Inc. and Subsidiaries

       

Consolidated Statements of Income

(dollars in thousands, except per share data)

 
Three Months Ended Three Months Ended
March 31, December 31, March 31, March 31,
2019 2018 2019 2018
INTEREST INCOME
Loans, Including Fees $ 22,179 $ 21,978 $ 22,179 $ 17,048
Investment Securities 1,901 1,864 1,901 1,567
Other   187     146     187     95
Total Interest Income   24,267     23,988     24,267     18,710
 
INTEREST EXPENSE
Deposits 5,703 5,119 5,703 3,009
Notes Payable 121 152 121 152
FHLB Advances 775 559 775 299
Subordinated Debentures 377 401 377 369
Federal Funds Purchased   160     315     160     118
Total Interest Expense   7,136     6,546     7,136     3,947
 
NET INTEREST INCOME 17,131 17,442 17,131 14,763
Provision for Loan Losses   600     800     600     600
 
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 16,531 16,642 16,531 14,163
 
NONINTEREST INCOME
Customer Service Fees 191 206 191 170
Net Loss on Sales of Available for Sale Securities (5 ) (17 ) (5 ) —
Net Gain on Sales of Foreclosed Assets — — — 4
Other Income   448     668     448     213
Total Noninterest Income   634     857     634     387
 
NONINTEREST EXPENSE
Salaries and Employee Benefits 4,802 5,086 4,802 4,318
Occupancy and Equipment 656 584 656 574
Other Expense   2,427     5,370     2,427     1,640
Total Noninterest Expense   7,885     11,040     7,885     6,532
 
INCOME BEFORE INCOME TAXES 9,280 6,459 9,280 8,018
Provision (Benefit) for Income Taxes   2,262     (1,302 )   2,262     2,068
NET INCOME $ 7,018   $ 7,761   $ 7,018   $ 5,950
 
EARNINGS PER SHARE
Basic $ 0.23 $ 0.26 $ 0.23 $ 0.23
Diluted 0.23 0.25 0.23 0.23
Dividends Paid Per Share — — — —
 

Bridgewater Bancshares, Inc. and Subsidiaries

     

Summary Quarterly Consolidated Financial Data

(dollars in thousands)

 
As of and for the Three Months Ended
March 31, December 31, March 31,
2019 2018 2018
Selected Asset Quality Data
Loans 30-89 Days Past Due $ 387 $ 311 $ 19
Loans 30-89 Days Past Due to Total Loans 0.02

 %

0.02 % 0.00 %
Nonperforming Loans $ 1,557 $ 581 $ 1,128
Nonperforming Loans to Total Loans 0.09

 %

0.03 % 0.08 %
Foreclosed Assets $ — $ — $ 288
Nonaccrual Loans to Total Loans 0.09

 %

0.03 % 0.08 %
Nonaccrual Loans and Loans Past Due 90 Days and Still Accruing to Total Loans 0.09 0.03 0.08
Nonperforming Assets (1) $ 1,557 $ 581 $ 1,416
Nonperforming Assets to Total Assets (1) 0.08

 %

0.03 % 0.08 %
Allowance for Loan Losses to Total Loans 1.20 1.20 1.22
Allowance for Loans Losses to Nonperforming Loans 1,323.51 3,447.68 1,517.82
Net Loan Charge-Offs (Recoveries) (Annualized) to Average Loans 0.01 (0.07 ) (0.01 )
 

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

Non-GAAP Financial Measures

   
 
For the Three Months Ended For the Three Months Ended
March 31, December 31, March 31, March 31,
2019 2018 2019 2018
(dollars in thousands)
Efficiency Ratio
Noninterest Expense $ 7,885 $ 11,040 $ 7,885 $ 6,532
Less: Amortization of Intangible Assets   (48 )   (48 )   (48 )   (48 )
Adjusted Noninterest Expense $ 7,837   $ 10,992   $ 7,837   $ 6,484  
Net Interest Income 17,131 17,442 17,131 14,763
Noninterest Income 634 857 634 387
Less: Loss on Sales of Securities   5     17     5     —  
Adjusted Operating Revenue $ 17,770   $ 18,316   $ 17,770   $ 15,150  
Efficiency Ratio 44.1 % 60.0 % 44.1 % 42.8 %
 
Adjusted Efficiency Ratio
Noninterest Expense $ 7,885 $ 11,040 $ 7,885 $ 6,532
Less: Amortization of Tax Credit Investments (177 ) (3,278 ) (177 ) —
Less: Amortization of Intangible Assets   (48 )   (48 )   (48 )   (48 )
Adjusted Noninterest Expense $ 7,660   $ 7,714   $ 7,660   $ 6,484  
Net Interest Income 17,131 17,442 17,131 14,763
Noninterest Income 634 857 634 387
Less: Loss on Sales of Securities   5     17     5     —  
Adjusted Operating Revenue $ 17,770   $ 18,316   $ 17,770   $ 15,150  
Adjusted Efficiency Ratio 43.1 % 42.1 % 43.1 % 42.8 %
 
       
As of and for the Three Months Ended As of and for the Three Months Ended
March 31, December 31, March 31, March 31,
2019 2018 2019 2018
(dollars in thousands, except share data)
Tangible Common Equity and Tangible Common Equity/Tangible Assets
Common Equity $ 231,775 $ 220,998 $ 231,775 $ 199,039
Less: Intangible Assets   (3,630 )   (3,678 )   (3,630 )   (3,821 )
Tangible Common Equity   228,145     217,320     228,145     195,218  
Total Assets 2,048,111 1,973,741 2,048,111 1,681,597
Less: Intangible Assets   (3,630 )   (3,678 )   (3,630 )   (3,821 )
Tangible Assets $ 2,044,481   $ 1,970,063   $ 2,044,481   $ 1,677,776  
Tangible Common Equity/Tangible Assets 11.16 % 11.03 % 11.16 % 11.64 %
 
Tangible Book Value Per Share
Book Value Per Common Share $ 7.70 $ 7.34 $ 7.70 $ 6.62
Less: Effects of Intangible Assets   (0.12 )   (0.12 )   (0.12 )   (0.13 )
Tangible Book Value Per Common Share $ 7.58   $ 7.22   $ 7.58   $ 6.49  
 
Average Tangible Common Equity
Average Common Equity $ 225,844 $ 215,254 $ 225,844 $ 149,318
Less: Effects of Average Intangible Assets   (3,653 )   (3,701 )   (3,653 )   (3,844 )
Average Tangible Common Equity $ 222,191   $ 211,553   $ 222,191   $ 145,474  

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