Bridgewater Bancshares, Inc. Announces Record Second Quarter 2019 Earnings

Company Release - 7/25/2019 7:05 AM ET

BLOOMINGTON, Minn.--(BUSINESS WIRE)-- Bridgewater Bancshares, Inc. (Nasdaq: BWB) (the Company), the parent company of Bridgewater Bank (the Bank), today announced net income of $8.0 million for the second quarter of 2019, an 18.7% increase over net income of $6.7 million for the second quarter of 2018. Net income per diluted common share for the second quarter of 2019 was $0.26, a 19.4% increase, compared to $0.22 per diluted common share for the same period in 2018.

“Our focus on profitable growth has led to record earnings in the second quarter of 2019,” noted Chairman, Chief Executive Officer, and President, Jerry Baack. “Double-digit loan and deposit growth supported by positive trends in net interest margin, favorable operating leverage, and consistently solid asset quality have all contributed to our strong financial results. We are encouraged by the positive momentum in new client acquisition activity since entering the St. Paul market last fall and are pleased with our growing brand awareness as we establish ourselves as the only locally led, publicly traded community bank within the Twin Cities market. ”

Second Quarter 2019 Financial Results

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

Diluted

 

Adjusted

 

Tangible book

ROA

 

ROE

 

Earnings per share

 

Earnings per share

 

efficiency ratio (1)

 

value per share (2)

1.55%

 

13.88%

 

$

0.27

 

$

0.26

 

42.7%

 

$

7.78

  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.

Linked-Quarter Highlights

  • Net income was $8.0 million for the second quarter of 2019, compared to $7.0 million for the first quarter of 2019, an increase of $1.0 million, or 14.1%.
  • Diluted earnings per common share were $0.26 for the second quarter of 2019, compared to $0.23 for the first quarter of 2019, an increase of 15.6%.
  • Tangible book value per share, a non-GAAP financial measure, increased 2.7%, or $0.20, to $7.78 at June 30, 2019, compared to $7.58 at March 31, 2019.
  • Annualized return on average assets (ROA) and return on average common equity (ROE) for the second quarter of 2019 were 1.55% and 13.88%, respectively, compared to annualized ROA and ROE of 1.42% and 12.60%, respectively, for the first quarter of 2019.
  • Gross loans increased $61.3 million, or 14.3% on an annualized basis, to $1.78 billion at June 30, 2019, compared to March 31, 2019.
  • Deposits increased $55.6 million, or 13.6% on an annualized basis, to $1.70 billion at June 30, 2019, compared to March 31, 2019.
  • The ratio of nonperforming assets to total assets was 0.07% at June 30, 2019, compared to 0.08% at March 31, 2019.
  • The adjusted efficiency ratio, a non-GAAP financial measure which excludes the impact of the amortization of tax credit investments from noninterest expense, was 42.7% for the second quarter of 2019, compared to 43.1% for the first quarter of 2019.

Year-Over-Year Highlights

  • Net income was $8.0 million for the second quarter of 2019, compared to $6.7 million for the second quarter of 2018, an increase of $1.3 million, or 18.7%.
  • Diluted earnings per common share were $0.26 for the second quarter of 2019, compared to $0.22 for the second quarter of 2018, an increase of 19.4%.
  • Tangible book value per share, a non-GAAP financial measure, increased 15.7%, or $1.05, to $7.78 at June 30, 2019, compared to $6.73 at June 30, 2018.
  • Annualized ROA and ROE for the second quarter of 2019 were 1.55% and 13.88%, respectively, compared to annualized ROA and ROE of 1.58% and 13.39%, respectively, for the second quarter of 2018.
  • Gross loans increased $321.6 million, or 22.0%, at June 30, 2019, compared to June 30, 2018.
  • Deposits increased $284.6 million, or 20.1%, at June 30, 2019, compared to June 30, 2018.
  • The ratio of nonperforming assets to total assets was 0.07% at June 30, 2019, compared to 0.05% at June 30, 2018.
  • The adjusted efficiency ratio, a non-GAAP financial measure which excludes the impact of the amortization of tax credit investments from noninterest expense, was 42.7% for the second quarter of 2019, compared to 39.0% for the second quarter of 2018.

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,

 

 

 

 

2019

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

Per Common Share Data (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share

 

$

0.27

 

 

$

0.23

 

 

$

0.22

 

 

$

0.50

 

 

$

0.45

 

 

Diluted Earnings Per Share

 

 

0.26

 

 

 

0.23

 

 

 

0.22

 

 

 

0.49

 

 

 

0.45

 

 

Book Value Per Share

 

 

7.90

 

 

 

7.70

 

 

 

6.85

 

 

 

7.90

 

 

 

6.85

 

 

Tangible Book Value Per Share (2)

 

 

7.78

 

 

 

7.58

 

 

 

6.73

 

 

 

7.78

 

 

 

6.73

 

 

Basic Weighted Average Shares Outstanding

 

 

29,703,024

 

 

 

30,097,638

 

 

 

30,059,374

 

 

 

29,899,241

 

 

 

27,919,457

 

 

Diluted Weighted Average Shares Outstanding

 

 

30,312,039

 

 

 

30,706,736

 

 

 

30,486,801

 

 

 

30,510,180

 

 

 

28,345,844

 

 

Shares Outstanding at Period End

 

 

28,986,729

 

 

 

30,097,674

 

 

 

30,059,374

 

 

 

28,986,729

 

 

 

30,059,374

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected Performance Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on Average Assets (Annualized)

 

 

1.55

%

 

 

1.42

%

 

 

1.58

%

 

 

1.49

%

 

 

1.53

%

 

Return on Average Common Equity (Annualized)

 

 

13.88

 

 

 

12.60

 

 

 

13.39

 

 

 

13.25

 

 

 

14.56

 

 

Return on Average Tangible Common Equity (Annualized) (2)

 

 

14.10

 

 

 

12.81

 

 

 

13.64

 

 

 

13.47

 

 

 

14.88

 

 

Yield on Interest Earning Assets

 

 

5.05

 

 

 

4.99

 

 

 

4.88

 

 

 

5.02

 

 

 

4.83

 

 

Yield on Total Loans, Gross

 

 

5.33

 

 

 

5.27

 

 

 

5.29

 

 

 

5.30

 

 

 

5.20

 

 

Cost of Interest Bearing Liabilities

 

 

2.07

 

 

 

2.06

 

 

 

1.52

 

 

 

2.07

 

 

 

1.45

 

 

Cost of Total Deposits

 

 

1.46

 

 

 

1.46

 

 

 

1.03

 

 

 

1.46

 

 

 

0.97

 

 

Net Interest Margin (3)

 

 

3.60

 

 

 

3.54

 

 

 

3.82

 

 

 

3.57

 

 

 

3.80

 

 

Efficiency Ratio (2)

 

 

50.1

 

 

 

44.1

 

 

 

39.0

 

 

 

47.2

 

 

 

40.8

 

 

Adjusted Efficiency Ratio (4)

 

 

42.7

 

 

 

43.1

 

 

 

39.0

 

 

 

42.9

 

 

 

40.8

 

 

Noninterest Expense to Average Assets (Annualized)

 

 

1.84

 

 

 

1.59

 

 

 

1.51

 

 

 

1.72

 

 

 

1.57

 

 

Adjusted Noninterest Expense to Average Assets (Annualized) (4)

 

 

1.57

 

 

 

1.55

 

 

 

1.51

 

 

 

1.56

 

 

 

1.57

 

 

Loan to Deposit Ratio

 

 

105.0

 

 

 

104.9

 

 

 

103.4

 

 

 

 

 

 

 

 

 

 

Core Deposits to Total Deposits

 

 

78.3

 

 

 

75.8

 

 

 

76.4

 

 

 

 

 

 

 

 

 

 

Tangible Common Equity to Tangible Assets (2)

 

 

10.64

 

 

 

11.16

 

 

 

11.56

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital Ratios (Bank Only)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 Leverage Ratio

 

 

10.99

%

 

 

10.88

%

 

 

11.32

%

 

 

 

 

 

 

 

 

 

Tier 1 Risk-based Capital Ratio

 

 

11.73

 

 

 

11.71

 

 

 

12.44

 

 

 

 

 

 

 

 

 

 

Total Risk-based Capital Ratio

 

 

12.67

 

 

 

12.83

 

 

 

13.60

 

 

 

 

 

 

 

 

 

 

  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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

June 30,

(dollars in thousands)

 

2019

 

2019

 

2018

 

2018

 

2018

Selected Balance Sheet Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

2,123,631

 

$

2,048,111

 

$

1,973,741

 

$

1,885,793

 

$

1,752,918

Total Loans, Gross

 

 

1,784,903

 

 

1,723,629

 

 

1,664,931

 

 

1,599,964

 

 

1,463,320

Allowance for Loan Losses

 

 

21,362

 

 

20,607

 

 

20,031

 

 

18,949

 

 

17,666

Goodwill and Other Intangibles

 

 

3,582

 

 

3,630

 

 

3,678

 

 

3,726

 

 

3,773

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

1,699,265

 

 

1,643,666

 

 

1,560,934

 

 

1,479,088

 

 

1,414,691

Tangible Common Equity (1)

 

 

225,555

 

 

228,145

 

 

217,320

 

 

207,126

 

 

202,154

Total Shareholders' Equity

 

 

229,137

 

 

231,775

 

 

220,998

 

 

210,852

 

 

205,927

Average Total Assets - Quarter-to-Date

 

 

2,069,707

 

 

2,011,174

 

 

1,948,909

 

 

1,816,485

 

 

1,715,335

Average Common Equity - Quarter-to-Date

 

 

231,374

 

 

225,844

 

 

215,254

 

 

208,773

 

 

202,101

  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)

 

2019

 

2019

 

2018

 

2019

 

2018

Selected Income Statement Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Income

 

$

25,520

 

$

24,267

 

$

20,392

 

$

49,787

 

$

39,102

Interest Expense

 

 

7,382

 

 

7,136

 

 

4,493

 

 

14,518

 

 

8,440

Net Interest Income

 

 

18,138

 

 

17,131

 

 

15,899

 

 

35,269

 

 

30,662

Provision for Loan Losses

 

 

600

 

 

600

 

 

900

 

 

1,200

 

 

1,500

Net Interest Income after Provision for Loan Losses

 

 

17,538

 

 

16,531

 

 

14,999

 

 

34,069

 

 

29,162

Noninterest Income

 

 

1,134

 

 

634

 

 

485

 

 

1,768

 

 

872

Noninterest Expense

 

 

9,474

 

 

7,885

 

 

6,464

 

 

17,359

 

 

12,996

Income Before Income Taxes

 

 

9,198

 

 

9,280

 

 

9,020

 

 

18,478

 

 

17,038

Provision for Income Taxes

 

 

1,189

 

 

2,262

 

 

2,274

 

 

3,451

 

 

4,342

Net Income

 

$

8,009

 

$

7,018

 

$

6,746

 

$

15,027

 

$

12,696

Income Statement

Net Interest Income

Net interest income was $18.1 million for the second quarter of 2019, an increase of $1.0 million, or 5.9%, from $17.1 million in the first quarter of 2019, and an increase of $2.2 million, or 14.1%, from $15.9 million in the second quarter of 2018. The linked-quarter increase in net interest income was driven by growth in average loans at higher rates. The year-over-year increase in net interest income was largely attributable to growth in average interest earning assets, which increased by 20.5% to $2.05 billion for the second quarter of 2019, from $1.70 billion for the second 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 second quarter of 2019 was 3.60%, a six basis point increase from 3.54% in the first quarter of 2019 and a 22 basis point decrease from 3.82% in the second quarter of 2018. While the linked-quarter increase in net interest margin can be attributed to the repricing of variable-rate loans and the origination of new loans at higher rates, the primary driver of margin expansion was the cost of funds stabilization. On a year-over-year basis, net interest margin also benefitted from increased repricing of variable-rate loans and the origination of new loans at higher rates; however, it compressed due to decreased loan fees recognized and increased rates paid on deposits and borrowings.

Interest income was $25.5 million for the second quarter of 2019, an increase of $1.3 million, or 5.2%, from $24.3 million in the first quarter of 2019, and an increase of $5.1 million, or 25.1%, from $20.4 million in the second quarter of 2018. The yield on interest earning assets (on a fully tax-equivalent basis) rose to 5.05% in the second quarter of 2019, compared to 4.99% in the first quarter of 2019 and 4.88% in the second 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 4 basis points higher from 5.29% in the second quarter of 2018 to 5.33% in the second 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.

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

June 30, 2019

 

 

March 31, 2019

 

 

December 31, 2018

 

 

 

September 30, 2018

 

 

June 30, 2018

 

Interest

 

5.10

%

 

5.07

%

 

4.98

%

 

 

4.87

%

 

4.80

%

Fees

 

0.23

 

 

0.20

 

 

0.29

 

 

 

0.38

 

 

0.49

 

Yield on Loans

 

5.33

%

 

5.27

%

 

5.27

%

 

 

5.25

%

 

5.29

%

Interest expense was $7.4 million for the second quarter of 2019, an increase of $246,000, or 3.4%, from $7.1 million in the first quarter of 2019, and an increase of $2.9 million, or 64.3%, from $4.5 million in the second quarter of 2018. The cost of interest bearing liabilities increased to 2.07% in the second quarter of 2019 from 2.06% in the first quarter of 2019, and 1.52% in the second quarter of 2018. These increases are due to higher costs and repricing of deposits and borrowings during both periods. Notably, since the Federal Open Market Committee began communicating its dovish policy pivot, the pace of rate increases on deposits decelerated significantly, and the Company only experienced a one basis point rise in funding costs on a linked-quarter basis. At the same time, local market competition for deposits remains fierce.

A summary of the Company’s average balances, interest yields and rates, and net interest margin for the three months ended June 30, 2019, March 31, 2019, and June 30, 2018 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

 

 

June 30, 2019

 

March 31, 2019

 

June 30, 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

 

$

38,142

 

$

171

 

1.80

%

$

27,945

 

$

87

 

1.27

%

$

25,082

 

$

65

 

1.04

%

Investment Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable Investment Securities

 

 

140,890

 

 

1,058

 

3.01

 

 

138,397

 

 

973

 

2.85

 

 

119,244

 

 

488

 

1.64

 

Tax-Exempt Investment Securities (1)

 

 

103,223

 

 

1,103

 

4.28

 

 

110,463

 

 

1,173

 

4.31

 

 

120,965

 

 

1,247

 

4.13

 

Total Investment Securities

 

 

244,113

 

 

2,161

 

3.55

 

 

248,860

 

 

2,146

 

3.50

 

 

240,209

 

 

1,735

 

2.90

 

Loans (2)

 

 

1,755,686

 

 

23,321

 

5.33

 

 

1,707,908

 

 

22,179

 

5.27

 

 

1,426,751