Bridgewater Bancshares, Inc. Announces Record Annual and Fourth Quarter 2019 Earnings

Company Release - 1/23/2020 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 $8.6 million for the fourth quarter of 2019, a 10.4% increase over net income of $7.8 million for the fourth quarter of 2018. Net income per diluted common share for the fourth quarter of 2019 was $0.29, a 14.0% increase, compared to $0.25 per diluted common share for the same period in 2018.

“We are pleased to announce record earnings for the fourth quarter and full year of 2019, which reflects the hard work and dedication of our BWB team,” noted Chairman, Chief Executive Officer, and President, Jerry Baack. “We continue to work diligently to grow both sides of the balance sheet as demonstrated by the Company’s annual, organic growth of 14.8% in gross loans and 16.8% in deposits. Despite this challenging rate environment, we are encouraged by our net interest margin stabilization as we actively manage our deposit costs lower. As our loan trajectory continues, asset quality remains strong with our nonperforming assets to total assets ratio at just 0.02% at the end of the year. Heading into 2020, we look forward to further technology investments aimed at enhancing our current client experience and servicing prospective clients attracted to our responsive support and simple solutions. We are grateful to be operating within the vibrant Twin Cities market and continue to brand ourselves as the only locally led, publicly traded community bank.”

Fourth Quarter 2019 Financial Results

 

 

 

 

Diluted

 

Nonperforming

 

Adjusted

 

Tangible book

ROA

 

ROE

 

Earnings per share

 

assets to total assets

 

efficiency ratio (1)

 

value per share (2)

1.53%

 

14.16%

 

$

0.29

 

0.02%

 

44.3%

 

$

8.33

 

(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 $8.6 million for the fourth quarter of 2019, compared to $7.8 million for the third quarter of 2019, an increase of $766,000, or 9.8%.
  • Diluted earnings per common share for the fourth quarter of 2019 were $0.29, compared to $0.27 for the third quarter of 2019, an increase of 9.6%.
  • Annualized return on average assets (ROA) and return on average common equity (ROE) for the fourth quarter of 2019 were 1.53% and 14.16%, respectively, compared to annualized ROA and ROE of 1.43% and 13.31%, respectively, for the third quarter of 2019.
  • The ratio of nonperforming assets to total assets was 0.02% at December 31, 2019, compared to 0.04% at September 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 44.3% for the fourth quarter of 2019, compared to 42.9% for the third quarter of 2019.

Annual 2019 Highlights

  • Net income was $31.4 million for the year ended December 31, 2019, compared to $26.9 million for the year ended December 31, 2018, an increase of 16.7%.
  • Diluted earnings per common share for the year ended December 31, 2019 were $1.05, compared to $0.91 for the year ended December 31, 2018, an increase of 14.5%.
  • ROA and ROE for the year ended December 31, 2019 were 1.49% and 13.50%, respectively, compared to ROA and ROE of 1.51% and 13.87%, respectively, for the year ended December 31, 2018.
  • Tangible book value per share, a non-GAAP financial measure, was $8.33 at December 31, 2019, compared to $7.22 at December 31, 2018, an increase of 15.3%.
  • Gross loans increased $247.1 million, or 14.8%, at December 31, 2019, compared to December 31, 2018.
  • Deposits increased $262.4 million, or 16.8%, at December 31, 2019, compared to December 31, 2018.
  • Net loan charge-offs as a percent of average loans was 0.01% for the year ended December 31, 2019, compared to 0.00% for the year ended December 31, 2018.
  • The ratio of nonperforming assets to total assets decreased to 0.02% at December 31, 2019, compared to 0.03% at December 31, 2018.
  • The adjusted efficiency ratio, a non-GAAP financial measure was 43.3% for the year ended December 31, 2019, compared to 41.7% for the year ended December 31, 2018.

Key Financial Measures

 

 

As of and for the Three Months Ended

 

 

As of and for the Year Ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

 

December 31,

 

December 31,

 

 

 

2019

 

2019

 

2018

 

 

2019

 

2018

 

Per Common Share Data (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share

 

$

0.30

 

$

0.27

 

$

0.26

 

 

$

1.07

 

$

0.93

 

Diluted Earnings Per Share

 

 

0.29

 

 

0.27

 

 

0.25

 

 

 

1.05

 

 

0.91

 

Book Value Per Share

 

 

8.45

 

 

8.20

 

 

7.34

 

 

 

 

 

 

 

 

Tangible Book Value Per Share (2)

 

 

8.33

 

 

8.08

 

 

7.22

 

 

 

 

 

 

 

 

Basic Weighted Average Shares Outstanding

 

 

28,833,576

 

 

28,820,144

 

 

30,072,003

 

 

 

29,358,644

 

 

29,001,393

 

Diluted Weighted Average Shares Outstanding

 

 

29,561,103

 

 

29,497,961

 

 

30,506,824

 

 

 

29,996,776

 

 

29,436,214

 

Shares Outstanding at Period End

 

 

28,973,572

 

 

28,781,162

 

 

30,097,274

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected Performance Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on Average Assets (Annualized)

 

 

1.53

%

 

1.43

%

 

1.58

%

 

 

1.49

%

 

1.51

%

Return on Average Common Equity (Annualized)

 

 

14.16

 

 

13.31

 

 

14.30

 

 

 

13.50

 

 

13.87

 

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

 

 

14.37

 

 

13.52

 

 

14.55

 

 

 

13.72

 

 

14.15

 

Yield on Interest Earning Assets

 

 

5.01

 

 

4.98

 

 

4.96

 

 

 

5.01

 

 

4.88

 

Yield on Total Loans, Gross

 

 

5.33

 

 

5.32

 

 

5.27

 

 

 

5.31

 

 

5.23

 

Cost of Interest Bearing Liabilities

 

 

1.96

 

 

2.04

 

 

1.92

 

 

 

2.03

 

 

1.65

 

Cost of Total Deposits

 

 

1.34

 

 

1.42

 

 

1.32

 

 

 

1.42

 

 

1.12

 

Net Interest Margin (3)

 

 

3.65

 

 

3.56

 

 

3.62

 

 

 

3.59

 

 

3.72

 

Efficiency Ratio (2)

 

 

49.6

 

 

45.6

 

 

60.0

 

 

 

47.4

 

 

46.5

 

Adjusted Efficiency Ratio (4)

 

 

44.3

 

 

42.9

 

 

42.1

 

 

 

43.3

 

 

41.7

 

Noninterest Expense to Average Assets (Annualized)

 

 

1.87

 

 

1.66

 

 

2.25

 

 

 

1.75

 

 

1.78

 

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

 

 

1.67

 

 

1.56

 

 

1.58

 

 

 

1.59

 

 

1.59

 

Loan to Deposit Ratio

 

 

104.9

 

 

102.4

 

 

106.7

 

 

 

 

 

 

 

 

Core Deposits to Total Deposits

 

 

80.7

 

 

79.9

 

 

75.8

 

 

 

 

 

 

 

 

Tangible Common Equity to Tangible Assets (2)

 

 

10.65

 

 

10.43

 

 

11.03

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital Ratios (Bank Only)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 Leverage Ratio

 

 

11.01

%

 

10.88

%

 

10.82

%

 

 

 

 

 

 

 

Tier 1 Risk-based Capital Ratio

 

 

11.72

 

 

11.61

 

 

11.63

 

 

 

 

 

 

 

 

Total Risk-based Capital Ratio

 

 

12.16

 

 

12.44

 

 

12.76

 

 

 

 

 

 

 

 

 

(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

 

 

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

2019

 

2019

 

2019

 

2019

 

2018

Selected Balance Sheet Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

2,268,830

 

$

2,232,339

 

$

2,123,631

 

$

2,048,111

 

$

1,973,741

Total Loans, Gross

 

 

1,912,038

 

 

1,846,218

 

 

1,784,903

 

 

1,723,629

 

 

1,664,931

Allowance for Loan Losses

 

 

22,526

 

 

22,124

 

 

21,362

 

 

20,607

 

 

20,031

Goodwill and Other Intangibles

 

 

3,487

 

 

3,535

 

 

3,582

 

 

3,630

 

 

3,678

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

1,823,310

 

 

1,802,236

 

 

1,699,265

 

 

1,643,666

 

 

1,560,934

Tangible Common Equity (1)

 

 

241,307

 

 

232,524

 

 

225,555

 

 

228,145

 

 

217,320

Total Shareholders' Equity

 

 

244,794

 

 

236,059

 

 

229,137

 

 

231,775

 

 

220,998

Average Total Assets - Quarter-to-Date

 

 

2,221,370

 

 

2,168,909

 

 

2,069,707

 

 

2,011,174

 

 

1,948,909

Average Common Equity - Quarter-to-Date

 

 

240,188

 

 

232,590

 

 

231,374

 

 

225,844

 

 

215,254

 

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

 

 

For the Three Months Ended

 

For the Year Ended

 

 

December 31,

 

September 30,

 

December 31,

 

December 31,

 

December 31,

(dollars in thousands)

 

2019

 

2019

 

2018

 

2019

 

2018

Selected Income Statement Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Income

 

$

27,419

 

$

26,572

 

$

23,988

 

 

$

103,778

 

$

85,226

Interest Expense

 

 

7,491

 

 

7,637

 

 

6,546

 

 

 

29,646

 

 

20,488

Net Interest Income

 

 

19,928

 

 

18,935

 

 

17,442

 

 

 

74,132

 

 

64,738

Provision for Loan Losses

 

 

600

 

 

900

 

 

800

 

 

 

2,700

 

 

3,575

Net Interest Income after Provision for Loan Losses

 

 

19,328

 

 

18,035

 

 

16,642

 

 

 

71,432

 

 

61,163

Noninterest Income

 

 

1,112

 

 

946

 

 

857

 

 

 

3,826

 

 

2,543

Noninterest Expense

 

 

10,489

 

 

9,084

 

 

11,040

 

 

 

36,932

 

 

31,562

Income Before Income Taxes

 

 

9,951

 

 

9,897

 

 

6,459

 

 

 

38,326

 

 

32,144

Provision (Benefit) for Income Taxes

 

 

1,380

 

 

2,092

 

 

(1,302

)

 

 

6,923

 

 

5,224

Net Income

 

$

8,571

 

$

7,805

 

$

7,761

 

 

$

31,403

 

$

26,920

Income Statement

Net Interest Income

Net interest income was $19.9 million for the fourth quarter of 2019, an increase of $993,000, or 5.2%, from $18.9 million in the third quarter of 2019, and an increase of $2.5 million, or 14.3%, from $17.4 million in the fourth quarter of 2018. The linked-quarter increase in net interest income was due to growth in average interest earning assets, as well as a change in the mix of 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 $249.9 million, or 12.9%, to $2.19 billion for the fourth quarter of 2019, from $1.94 billion for the fourth 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 fourth quarter of 2019 was 3.65%, a 9 basis point increase from 3.56% in the third quarter of 2019, and a 3 basis point increase from 3.62% in the fourth quarter of 2018. The linked-quarter increase in net interest margin can be attributed to an increase in loan fee income and lower rates paid on deposits. The year-over-year increase in net interest margin can be largely attributed to an increase in interest and fees earned on loans which outpaced the higher rates paid on deposits and borrowings.

Interest income was $27.4 million for the fourth quarter of 2019, an increase of $847,000, or 3.2%, from $26.6 million in the third quarter of 2019, and an increase of $3.4 million, or 14.3%, from $24.0 million in the fourth quarter of 2018. The yield on interest earning assets (on a fully tax-equivalent basis) was 5.01% in the fourth quarter of 2019, compared to 4.98% in the third quarter of 2019, and 4.96% in the fourth quarter of 2018.

Loan interest income and loan fees remain the primary contributing factors to the linked-quarter and year-over-year increases in yield on interest earning assets, driving the aggregate loan yield to 5.33% in the fourth quarter of 2019, which is 1 basis point higher than 5.32% in the third quarter of 2019, and 6 basis points higher than 5.27% in the fourth quarter of 2018. 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. Increased loan fees recognized in the fourth quarter of 2019 in comparison to the third quarter of 2019 and the fourth quarter of 2018 were primarily due to the accelerated recognition of deferred fees on loans that were paid off prior to maturity.

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

 

 

Three Months Ended

 

 

 

December 31, 2019

 

 

September 30, 2019

 

 

June 30, 2019

 

 

 

March 31, 2019

 

 

December 31, 2018

 

Interest

 

5.00

%

 

5.07

%

 

5.10

%

 

 

5.07

%

 

4.98

%

Fees

 

0.33

 

 

0.25

 

 

0.23

 

 

 

0.20

 

 

0.29

 

Yield on Loans

 

5.33

%

 

5.32

%

 

5.33

%

 

 

5.27

%

 

5.27

%

Interest expense was $7.5 million for the fourth quarter of 2019, a decrease of $146,000, or 1.9%, from $7.6 million in the third quarter of 2019, and an increase of $945,000, or 14.4%, from $6.5 million in the fourth quarter of 2018. The cost of interest bearing liabilities decreased to 1.96% in the fourth quarter of 2019 from 2.04% in the third quarter of 2019, primarily due to lower rates paid on deposits, particularly on savings and money market accounts. On a year-over-year basis, the cost of interest bearing liabilities was up 4 basis points from 1.92% in the fourth quarter of 2018 to 1.96% in the fourth quarter of 2019 due to higher costs and repricing of deposits and