Bridgewater Bancshares, Inc. Announces Third Quarter 2019 Earnings

Company Release - 10/24/2019 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 $7.8 million for the third quarter of 2019, a 20.8% increase over net income of $6.5 million for the third quarter of 2018. Net income per diluted common share for the third quarter of 2019 was $0.27, a 24.8% increase, compared to $0.21 per diluted common share for the same period in 2018.

“We produced solid financial results in the third quarter as we continue to drive shareholder value,” commented Chairman, Chief Executive Officer, and President, Jerry Baack. “We could not be more pleased with our deposit growth of $103.0 million during the quarter, representing 24.0% annualized growth. This result reflects our ongoing investment in our deposit offering platform and brand awareness efforts. Profitable loan growth continues to be at the forefront of our business plan and we remain focused on disciplined loan pricing in this challenging rate environment. Our asset quality remains strong as demonstrated by our nonperforming assets to total assets ratio of 0.04%, which speaks to our diligent underwriting practices and the health of the diversified Twin Cities economy.”

Third Quarter 2019 Financial Results

 

 

 

 

Diluted

 

Adjusted

 

Tangible book

ROA

 

ROE

    

Earnings per share

    

efficiency ratio (1)

    

value per share (2)

1.43%

 

13.31%

 

$

 0.27

 

42.9%

 

$

 8.08

 
  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 $7.8 million for the third quarter of 2019, compared to $8.0 million for the second quarter of 2019.
  • Diluted earnings per common share were $0.27 for the third quarter of 2019, compared to $0.26 for the second quarter of 2019.
  • Tangible book value per share, a non-GAAP financial measure, was $8.08 at September 30, 2019, compared to $7.78 at June 30, 2019.
  • Annualized return on average assets (ROA) and return on average common equity (ROE) for the third quarter of 2019 were 1.43% and 13.31%, respectively, compared to annualized ROA and ROE of 1.55% and 13.88%, respectively, for the second quarter of 2019.
  • Gross loans increased $61.3 million, or 13.6% on an annualized basis, to $1.85 billion at September 30, 2019, compared to June 30, 2019.
  • Deposits increased $103.0 million, or 24.0% on an annualized basis, to $1.80 billion at September 30, 2019, compared to June 30, 2019.
  • The ratio of nonperforming assets to total assets was 0.04% at September 30, 2019, compared to 0.07% at June 30, 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 42.9% for the third quarter of 2019, compared to 42.7% for the second quarter of 2019.

Year-Over-Year Highlights

  • Net income was $7.8 million for the third quarter of 2019, compared to $6.5 million for the third quarter of 2018, an increase of $1.3 million, or 20.8%.
  • Diluted earnings per common share were $0.27 for the third quarter of 2019, compared to $0.21 for the third quarter of 2018, an increase of 24.8%.
  • Tangible book value per share, a non-GAAP financial measure, increased 17.2%, or $1.19, to $8.08 at September 30, 2019, compared to $6.89 at September 30, 2018.
  • Annualized ROA and ROE for the third quarter of 2019 were 1.43% and 13.31%, respectively, compared to annualized ROA and ROE of 1.41% and 12.28%, respectively, for the third quarter of 2018.
  • Gross loans increased $246.3 million, or 15.4%, at September 30, 2019, compared to September 30, 2018.
  • Deposits increased $323.1 million, or 21.8%, at September 30, 2019, compared to September 30, 2018.
  • The ratio of nonperforming assets to total assets was 0.04% at September 30, 2019 and September 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 42.9% for the third quarter of 2019, compared to 42.7% for the third quarter of 2018.

Key Financial Measures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of and for the Three Months Ended

 

 

As of and for the Nine Months Ended

 

 

 

 

September 30,

 

June 30,

 

September 30,

 

 

September 30,

 

September 30,

 

 

 

 

2019

 

2019

 

2018

 

 

2019

 

2018

 

 

Per Common Share Data (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share

 

$

0.27

 

$

0.27

 

$

0.22

 

 

$

0.77

 

$

0.67

 

 

Diluted Earnings Per Share

 

 

0.27

 

 

0.26

 

 

0.21

 

 

 

0.76

 

 

0.66

 

 

Book Value Per Share

 

 

8.20

 

 

7.90

 

 

7.01

 

 

 

8.20

 

 

7.01

 

 

Tangible Book Value Per Share (2)

 

 

8.08

 

 

7.78

 

 

6.89

 

 

 

8.08

 

 

6.89

 

 

Basic Weighted Average Shares Outstanding

 

 

28,820,144

 

 

29,703,024

 

 

30,059,374

 

 

 

29,535,589

 

 

28,640,601

 

 

Diluted Weighted Average Shares Outstanding

 

 

29,497,961

 

 

30,312,039

 

 

30,489,648

 

 

 

30,181,556

 

 

29,070,876

 

 

Shares Outstanding at Period End

 

 

28,781,162

 

 

28,986,729

 

 

30,059,374

 

 

 

28,781,162

 

 

30,059,374

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected Performance Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on Average Assets (Annualized)

 

 

1.43

%

 

1.55

%

 

1.41

%

 

 

1.46

%

 

1.49

%

 

Return on Average Common Equity (Annualized)

 

 

13.31

 

 

13.88

 

 

12.28

 

 

 

13.27

 

 

13.70

 

 

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

 

 

13.52

 

 

14.10

 

 

12.51

 

 

 

13.49

 

 

13.99

 

 

Yield on Interest Earning Assets

 

 

4.98

 

 

5.05

 

 

4.92

 

 

 

5.01

 

 

4.85

 

 

Yield on Total Loans, Gross

 

 

5.32

 

 

5.33

 

 

5.25

 

 

 

5.31

 

 

5.22

 

 

Cost of Interest Bearing Liabilities

 

 

2.04

 

 

2.07

 

 

1.73

 

 

 

2.06

 

 

1.54

 

 

Cost of Total Deposits

 

 

1.42

 

 

1.46

 

 

1.19

 

 

 

1.44

 

 

1.05

 

 

Net Interest Margin (3)

 

 

3.56

 

 

3.60

 

 

3.71

 

 

 

3.57

 

 

3.76

 

 

Efficiency Ratio (2)

 

 

45.6

 

 

50.1

 

 

42.7

 

 

 

46.6

 

 

41.5

 

 

Adjusted Efficiency Ratio (4)

 

 

42.9

 

 

42.7

 

 

42.7

 

 

 

42.9

 

 

41.5

 

 

Noninterest Expense to Average Assets (Annualized)

 

 

1.66

 

 

1.84

 

 

1.64

 

 

 

1.70

 

 

1.60

 

 

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

 

 

1.56

 

 

1.57

 

 

1.64

 

 

 

1.56

 

 

1.59

 

 

Loan to Deposit Ratio

 

 

102.4

 

 

105.0

 

 

108.2

 

 

 

 

 

 

 

 

 

Core Deposits to Total Deposits

 

 

79.9

 

 

78.3

 

 

76.6

 

 

 

 

 

 

 

 

 

Tangible Common Equity to Tangible Assets (2)

 

 

10.43

 

 

10.64

 

 

11.01

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital Ratios (Bank Only)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 Leverage Ratio

 

 

10.88

%

 

10.99

%

 

11.16

%

 

 

 

 

 

 

 

 

Tier 1 Risk-based Capital Ratio

 

 

11.61

 

 

11.73

 

 

11.82

 

 

 

 

 

 

 

 

 

Total Risk-based Capital Ratio

 

 

12.44

 

 

12.67

 

 

12.95

 

 

 

 

 

 

 

 

 

  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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

(dollars in thousands)

 

2019

 

2019

 

2019

 

2018

 

2018

Selected Balance Sheet Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

2,232,339

 

$

2,123,631

 

$

2,048,111

 

$

1,973,741

 

$

1,885,793

Total Loans, Gross

 

 

1,846,218

 

 

1,784,903

 

 

1,723,629

 

 

1,664,931

 

 

1,599,964

Allowance for Loan Losses

 

 

22,124

 

 

21,362

 

 

20,607

 

 

20,031

 

 

18,949

Goodwill and Other Intangibles

 

 

3,535

 

 

3,582

 

 

3,630

 

 

3,678

 

 

3,726

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

1,802,236

 

 

1,699,265

 

 

1,643,666

 

 

1,560,934

 

 

1,479,088

Tangible Common Equity (1)

 

 

232,524

 

 

225,555

 

 

228,145

 

 

217,320

 

 

207,126

Total Shareholders' Equity

 

 

236,059

 

 

229,137

 

 

231,775

 

 

220,998

 

 

210,852

Average Total Assets - Quarter-to-Date

 

 

2,168,909

 

 

2,069,707

 

 

2,011,174

 

 

1,948,909

 

 

1,816,485

Average Common Equity - Quarter-to-Date

 

 

232,590

 

 

231,374

 

 

225,844

 

 

215,254

 

 

208,773

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

For the Nine Months Ended

 

 

September 30,

 

June 30,

 

September 30,

 

September 30,

 

September 30,

(dollars in thousands)

 

2019

 

2019

 

2018

 

2019

 

2018

Selected Income Statement Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Income

 

$

26,572

 

$

25,520

 

$

22,136

 

$

76,359

 

$

61,238

Interest Expense

 

 

7,637

 

 

7,382

 

 

5,502

 

 

22,155

 

 

13,942

Net Interest Income

 

 

18,935

 

 

18,138

 

 

16,634

 

 

54,204

 

 

47,296

Provision for Loan Losses

 

 

900

 

 

600

 

 

1,275

 

 

2,100

 

 

2,775

Net Interest Income after Provision for Loan Losses

 

 

18,035

 

 

17,538

 

 

15,359

 

 

52,104

 

 

44,521

Noninterest Income

 

 

946

 

 

1,134

 

 

814

 

 

2,714

 

 

1,686

Noninterest Expense

 

 

9,084

 

 

9,474

 

 

7,526

 

 

26,443

 

 

20,522

Income Before Income Taxes

 

 

9,897

 

 

9,198

 

 

8,647

 

 

28,375

 

 

25,685

Provision for Income Taxes

 

 

2,092

 

 

1,189

 

 

2,184

 

 

5,543

 

 

6,526

Net Income

 

$

7,805

 

$

8,009

 

$

6,463

 

$

22,832

 

$

19,159

Income Statement

Net Interest Income

Net interest income was $18.9 million for the third quarter of 2019, an increase of $797,000, or 4.4%, from $18.1 million in the second quarter of 2019, and an increase of $2.3 million, or 13.8%, from $16.6 million in the third quarter of 2018. The linked-quarter increase in net interest income was driven by growth in average interest earning assets. The year-over-year increase in net interest income was largely attributable to growth in average interest earning assets, which increased by $329.5 million, or 18.2%, to $2.13 billion for the third quarter of 2019, from $1.81 billion for the third 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 third quarter of 2019 was 3.56%, a 4 basis point decrease from 3.60% in the second quarter of 2019, and a 15 basis point decrease from 3.71% in the third quarter of 2018. While yield curve dynamics and lower market rates have weighed on earning asset yields, and subsequently the Company’s net interest margin, funding costs have benefitted as evidenced by the 3 basis point decline over the linked-quarter. On a year-over-year basis, net interest margin benefitted from repricing of variable-rate loans and the origination of new loans at higher rates; however, it compressed due to elevated cash balances, lower loan fees recognized, and increased rates paid on deposits and borrowings.

Interest income was $26.6 million for the third quarter of 2019, an increase of $1.1 million, or 4.1%, from $25.5 million in the second quarter of 2019, and an increase of $4.4 million, or 20.0%, from $22.1 million in the third quarter of 2018. The yield on interest earning assets (on a fully tax-equivalent basis) was 4.98% in the third quarter of 2019, compared to 5.05% in the second quarter of 2019 and 4.92% in the third quarter of 2018.

Loan interest income and loan fees remain the primary contributing factors to the year-over-year increase in yield on interest earning assets, driving the aggregate loan yield 7 basis points higher from 5.25% in the third quarter of 2018 to 5.32% in the third quarter of 2019. The linked-quarter decrease of the aggregate loan yield of 1 basis point was primarily due to competitive market pressures and lower interest rates. On a year-over-year basis, 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 periods indicated is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

September 30, 2019

 

 

June 30, 2019

 

 

March 31, 2019

 

 

 

December 31, 2018

 

 

September 30, 2018

 

Interest

 

5.07

%

 

5.10

%

 

5.07

%

 

 

4.98

%

 

4.87

%

Fees

 

0.25

 

 

0.23

 

 

0.20

 

 

 

0.29

 

 

0.38

 

Yield on Loans

 

5.32

%

 

5.33

%

 

5.27

%

 

 

5.27

%

 

5.25

%

Interest expense was $7.6 million for the third quarter of 2019, an increase of $255,000, or 3.5%, from $7.4 million in the second quarter of 2019, and an increase of $2.1 million, or 38.8%, from $5.5 million in the third quarter of 2018. The cost of interest bearing liabilities decreased to 2.04% in the third quarter of 2019 from 2.07% in the second quarter of 2019, primarily due to the Company exercising embedded optionality in the brokered deposit portfolio and supplementing the portfolio with strong core deposit growth at lower rates. On a year-over-year basis, the cost of interest bearing liabilities was up 31 basis points from 1.73% in the third quarter of 2018 to 2.04% in the third quarter of 2019 due to higher costs and repricing of deposits and borrowings during the period. Despite the Federal Open Market Committee cutting rates by 25 basis points twice during the period, 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 September 30, 2019, June 30, 2019 and September 30, 2018 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

 

 

September 30, 2019

 

June 30, 2019

 

September 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

 

$

73,970

 

$

346

 

1.86

%

$

38,142

 

$

171

 

1.80

%

$

23,822

 

$

72

 

1.20

%

Investment Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable Investment Securities

 

 

151,319

 

 

1,095

 

2.87

 

 

140,890

 

 

1,058

 

3.01

 

 

132,197

 

 

839

 

2.52

 

Tax-Exempt Investment Securities (1)

 

 

95,575

 

 

1,031

 

4.28

 

 

103,223

 

 

1,103

 

4.28

 

 

116,042

 

 

1,204

 

4.12

 

Total Investment Securities

 

 

246,894

 

 

2,126

 

3.42

 

 

244,113

 

 

2,161

 

3.55

 

 

248,239

 

 

2,043

 

3.27

 

Loans (2)

 

 

1,805,920

 

 

24,220

 

5.32

 

 

1,755,686

 

 

23,321

 

5.33

 

 

1,526,765

 

 

20,207

 

5.25

 

Federal Home Loan Bank Stock

 

 

8,111

 

 

96

 

4.72

 

 

7,694

 

 

100

 

5.23

 

 

6,619

 

 

67

 

4.02

 

Total Interest Earning Assets

 

 

2,134,895

 

 

26,788

 

4.98

%

 

2,045,635

 

 

25,753

 

5.05

%

 

1,805,445

 

 

22,389

 

4.92

%

Noninterest Earning Assets

 

 

34,014

 

 

 

 

 

 

 

24,072

 

 

 

 

 

 

 

11,040

 

 

 

 

 

 

Total Assets

 

$

2,168,909

 

 

 

 

 

 

$

2,069,707

 

 

 

 

 

 

$

1,816,485

 

 

 

 

 

 

Interest Bearing Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Bearing Transaction Deposits

 

 

250,667

 

 

511

 

0.81

%

 

202,886

 

 

387

 

0.77

%

 

171,923

 

 

165

 

0.38

%

Savings and Money Market Deposits

 

 

453,340

 

 

2,080

 

1.82

 

 

431,716

 

 

1,938

 

1.80

 

 

398,092

 

 

1,373

 

1.37

 

Time Deposits

 

 

359,329

 

 

2,229

 

2.46

 

 

354,026

 

 

2,120

 

2.40

 

 

295,320

 

 

1,490

 

2.00

 

Brokered Deposits

 

 

242,600

 

 

1,389

 

2.27

 

 

266,804

 

 

1,575

 

2.37

 

 

241,355

 

 

1,294

 

2.13

 

Federal Funds Purchased

 

 

 

 

 

 

 

2,089

 

 

12

 

2.24

 

 

27,391

 

 

147

 

2.13

 

Notes Payable

 

 

13,500

 

 

127

 

3.73

 

 

14,000

 

 

130