News Details

BLOOMINGTON, Minn.--(BUSINESS WIRE)-- Bridgewater Bancshares, Inc. (Nasdaq: BWB) (the Company), the parent company of Bridgewater Bank (the Bank), today announced net income of $6.5 million for the third quarter of 2018, a 38.2% increase over net income of $4.7 million for the third quarter of 2017. Net income per diluted common share for the third quarter of 2018 was $0.21, a 12.5% increase, compared to $0.19 per diluted common share for the same period in 2017.

“We had another strong quarter and I could not be more pleased with the results.” says Jerry Baack, Chairman, Chief Executive Officer, and President. “Our third quarter results demonstrate strong organic growth on both sides of the balance sheet, which is supported by our continued investments in our people and infrastructure. We look to finish this milestone year by focusing on the expansion of our operations into the St. Paul market, as well as remaining active in attracting and onboarding displaced clients and personnel from recent M&A dislocation in our market.”

Third Quarter 2018 Highlights

• Annualized return on average assets (ROA) and return on average common equity (ROE) for the third quarter of 2018 were 1.41% and 12.28%, respectively, compared to annualized ROA and ROE of 1.23% and 14.07%, respectively, for the third quarter of 2017.
• Net income was $6.5 million for the third quarter of 2018 compared to $4.7 million for the third quarter of 2017, an increase of 38.2%.
• Diluted earnings per common share for the third quarter of 2018 were $0.21, compared to $0.19 for the third quarter of 2017.
• Gross loans increased $328.0 million to $1.60 billion at the end of the third quarter of 2018 compared to $1.27 billion as of the same time last year, an increase of 25.8%.
• Nonperforming assets to total assets decreased to 0.04%, compared to 0.13% in the third quarter of 2017.

Income Statement

Net Interest Income

Net interest income was $16.6 million for the third quarter of 2018, an increase of $2.6 million, or 18.3%, compared to $14.1 million for the third quarter of 2017. The increase in net interest income was largely attributable to growth in average interest earning assets, which increased by 21.0% to $1.81 billion for the three months ended September 30, 2018, from $1.49 billion for the three months ended September 30, 2017. 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 2018 was 3.71%, compared to 3.89% for the third quarter of 2017, a decrease of 18 basis points. While net interest margin has benefitted from the repricing of variable-rate loans and the origination of new loans at higher rates, this was offset by increased balances and rates on non-core deposits and borrowings. Furthermore, the new lower statutory federal tax rate reduced the tax equivalent adjustment by six basis points.

Interest income increased $4.8 million, or 27.3%, to $22.1 million for the third quarter of 2018, compared to $17.4 million for the third quarter of 2017, primarily due to the increase in average loan balances. The yield on interest earning assets (on a fully tax-equivalent basis) rose to 4.92% in the third quarter of 2018, compared to 4.77% in the third quarter of 2017. 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 12 basis points higher from 5.13% in the third quarter of 2017 to 5.25% in the third quarter of 2018.

Interest expense increased $2.2 million to $5.5 million for the third quarter of 2018, compared to $3.3 million for the third quarter of 2017, primarily due to increases in interest rates and average balances of both deposits and borrowings. The cost of interest bearing liabilities increased to 1.73% in the third quarter of 2018 from 1.24% in the third quarter of 2017 due to higher costs of both deposits and borrowings compared to the third quarter of 2017.

A summary of the Company’s average balances, interest yields and rates, and net interest margin for the three months ended September 30, 2018 and 2017 is as follows:

Provision for Loan Losses

The provision for loan losses was $1.3 million for the third quarter of 2018, an increase of $75,000 compared to the provision for loan losses of $1.2 million for the third quarter of 2017. The provision increased in the third quarter of 2018 primarily due to higher loan growth in comparison to the third quarter of 2017.

A reconciliation of the Company’s allowance for loan losses for the three and nine month periods ended September 30, 2018 and 2017 is as follows:

Noninterest Income

Noninterest income was $814,000 for the third quarter of 2018, a decrease of $173,000 from $987,000 for the third quarter of 2017.

The following table presents the major components of noninterest income for the three and nine month periods ended September 30, 2018, compared to the three and nine month periods ended September 30, 2017:

Noninterest Expense

Noninterest expense was $7.5 million for the third quarter of 2018, an increase of $1.4 million, or 23.2% from $6.1 million for the third quarter of 2017. The increase was primarily driven by a $1.2 million increase in salaries and employee benefits as the result of merit increases and increased staff to meet the needs of the Company’s growth. The increase was partially offset by a decrease of $456,000 in professional and consulting fees due to higher expenses incurred in the third quarter of 2017 in contemplation of the initial public offering, in comparison to the third quarter of 2018.

The following table presents the major components of noninterest expense for the three and nine month periods ended September 30, 2018, compared to the three and nine month periods ended September 30, 2017:

Full-time equivalent employees increased from 115 at the end of the third quarter of 2017 to 139 at the end of the third quarter of 2018. The increase includes key strategic hires, particularly in deposit gathering roles, as the Company continues to capitalize on M&A disruption. Despite increased overhead, the Company experienced only a marginal increase in the efficiency ratio, a non-GAAP financial measure. The efficiency ratio was 42.7% for the third quarter of 2018, compared to 40.3% for the third quarter of 2017.

Income Taxes

The effective combined federal and state income tax rate for the third quarter of 2018 was 25.3%, compared to 39.6% for the third quarter of 2017. The lower effective combined rate was primarily due to the reduction in the federal corporate tax rate from 35% to 21%.

Balance Sheet

Total assets at September 30, 2018 were $1.89 billion, a 7.6% increase from $1.75 billion at June 30, 2018, and a 21.1% increase from $1.56 billion at September 30, 2017. The increase in total assets was primarily due to organic loan growth.

Total gross loans at September 30, 2018 were $1.60 billion, an increase of $136.6 million, or 9.3%, over total gross loans of $1.46 billion at June 30, 2018, and an increase of $328.0 million, or 25.8%, over total gross loans of $1.27 billion at September 30, 2017.

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

Total deposits at September 30, 2018 were $1.48 billion, an increase of $64.4 million, or 4.6%, over total deposits of $1.41 billion at June 30, 2018, and an increase of $184.3 million, or 14.2%, over total deposits of $1.29 billion at September 30, 2017.

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

Total shareholders’ equity at September 30, 2018 was $210.9 million, an increase of $4.9 million, or 2.4%, over total shareholders’ equity of $205.9 million at June 30, 2018, and an increase of $77.2 million, or 57.7%, over total shareholders’ equity of $133.7 million at September 30, 2017. The increase in total shareholders’ equity for the three months ended September 30, 2018 compared to the three months ended June 30, 2018, was primarily due to net income retained. The increase in total shareholders’ equity for the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017, was primarily due to capital raised in the initial public offering.

Asset Quality

Asset quality metrics for the Company remained strong at September 30, 2018. Annualized net charge-offs as a percent of average loans for the third quarter of 2018 were 0.00%, compared to 0.10% for the second quarter of 2018, and 0.01% for the third quarter of 2017. At September 30, 2018, the Company’s nonperforming assets, which include nonaccrual loans and other real estate owned, were $718,000, or 0.04% of total assets, as compared to $894,000, or 0.05% of total assets at June 30, 2018, and $2.0 million, or 0.13% of total assets at September 30, 2017.

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 press 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20181025005184/en/

Bridgewater Bancshares, Inc.
Investor Relations:
Jerry Baack, 952-893-6866
Chief Executive Officer
investorrelations@bwbmn.com

Source: Bridgewater Bancshares, Inc.