News Details

BLOOMINGTON, Minn.--(BUSINESS WIRE)-- Bridgewater Bancshares, Inc. (Nasdaq: BWB) (the Company), the parent company of Bridgewater Bank (the Bank), today announced record net income of $6.7 million for the second quarter of 2018, a 40.6% increase over net income of $4.8 million for the second quarter of 2017. Net income per diluted common share for the second quarter of 2018 was $0.22, a 14.4% increase, compared to $0.19 per diluted common share for the same period in 2017.

Jerry Baack, Chairman, President, and Chief Executive Officer, commented on the quarter, “We are very pleased to report another strong quarter as a publicly traded company. We achieved record net income this quarter, driven by continued organic balance sheet growth, tax reform, and strong asset quality. We have seamlessly integrated the costs associated with being a publicly traded company and continue to exhibit favorable operating leverage. Our customer acquisition and development activities have never been stronger as we seek to capitalize on continued M&A disruption and establish ourselves as the only locally led, publicly traded community bank in the Twin Cities market.”

Second Quarter 2018 Highlights

• Annualized return on average assets (ROA) and return on average common equity (ROE) for the second quarter of 2018 were 1.58% and 13.39%, respectively, compared to annualized ROA and ROE of 1.37% and 15.28%, respectively, for the second quarter of 2017.
• Net income was $6.7 million for the second quarter of 2018, compared to $4.8 million for the second quarter of 2017, an increase of 40.6%.
• Diluted earnings per common share for the second quarter of 2018 were $0.22, compared to $0.19 for the second quarter of 2017.
• Gross loans increased $290.5 million to $1.46 billion at the end of the second quarter of 2018, compared to $1.17 billion as of the same time last year, an increase of 24.8%.
• Nonperforming assets to total assets decreased to 0.05%, compared to 0.25% in the second quarter of 2017.

Income Statement

Net Interest Income

Net interest income was $15.9 million for the second quarter of 2018, an increase of $2.8 million, or 21.6%, compared to $13.1 million for the second quarter of 2017. The increase in net interest income was largely attributable to growth in average interest earning assets, which increased by 22.2% to $1.70 billion for the three months ended June 30, 2018, from $1.39 billion for the three months ended June 30, 2017. This increase in average interest earning assets was due to continued organic growth in the loan portfolio.

Net interest margin (on a fully tax-equivalent basis) for the second quarter of 2018 was 3.82%, compared to 3.94% for the second quarter of 2017, a decrease of 12 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 partially 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 $4.6 million, or 29.3%, to $20.4 million for the second quarter of 2018, compared to $15.8 million for the second 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 4.88% in the second quarter of 2018, compared to 4.72% in the second quarter of 2017, primarily due to the rising loan portfolio yield. With new loan production at yields accretive to the existing portfolio yield, as well as loan related fees providing a strong yield enhancement, the aggregate loan yield increased 26 basis points from 5.03% in the second quarter of 2017 to 5.29% in the second quarter of 2018.

Interest expense increased $1.8 million to $4.5 million for the second quarter of 2018, compared to $2.7 million for the second quarter of 2017, primarily due to increases in average balances of both deposits and borrowings. The cost of interest bearing liabilities increased to 1.52% in the second quarter of 2018 from 1.12% in the second quarter of 2017, primarily due to higher costs and average balances of non-core interest bearing deposits and the issuance of subordinated debt that occurred in 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 June 30, 2018 and 2017 is as follows:

Provision for Loan Losses

The provision for loan losses was $900,000 for the second quarter of 2018, an increase of $75,000 compared to the provision for loan losses of $825,000 for the second quarter of 2017. The provision increased in the second quarter of 2018 due to a modest increase in net charge-offs in comparison to the second quarter of 2017.

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

Noninterest Income

Noninterest income was $485,000 for the second quarter of 2018, a decrease of $1,000 from $486,000 for the second quarter of 2017.

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

Noninterest Expense

Noninterest expense was $6.5 million for the second quarter of 2018, an increase of $1.2 million, or 22.6% from $5.3 million for the second 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 growing infrastructure.

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

Full-time equivalent employees increased from 112 at the end of the second quarter of 2017 to 125 at the end of the second quarter of 2018. Despite increased overhead, as well as higher operating costs associated with the Company’s initial public offering, the Company experienced only a marginal increase in the efficiency ratio, a non-GAAP financial measure. The efficiency ratio was 39.0% for the second quarter of 2018, compared to 38.3% for the second quarter of 2017.

Income Taxes

The effective combined federal and state income tax rate for the second quarter of 2018 was 25.2%, compared to 35.7% for the second quarter of 2017. The lower effective combined rate is primarily due to the reduction in the federal corporate tax rate from 35% to 21%.

Balance Sheet

Total assets at June 30, 2018 were $1.75 billion, a 4.2% increase from $1.68 billion at March 31, 2018, and a 21.1% increase from $1.45 billion at June 30, 2017. The increase in total assets was primarily due to organic loan growth.

Total gross loans at June 30, 2018 were $1.46 billion, an increase of $57.9 million, or 4.1%, over total gross loans of $1.41 billion at March 31, 2018, and an increase of $290.5 million, or 24.8%, over total gross loans of $1.17 billion at June 30, 2017.

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

Total deposits at June 30, 2018 were $1.41 billion, an increase of $61.7 million, or 4.6%, over total deposits of $1.35 billion at March 31, 2018, and an increase of $192.7 million, or 15.8%, over total deposits of $1.22 billion at June 30, 2017.

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

Total shareholders’ equity at June 30, 2018 was $205.9 million, an increase of $6.9 million, or 3.5%, over total shareholders’ equity of $199.0 million at March 31, 2018, and an increase of $77.4 million, or 60.2%, over total shareholders’ equity of $128.5 million at June 30, 2017. The increase in total shareholders’ equity was primarily due to net income retained and capital raised in the initial public offering for the periods, respectively.

Asset Quality

Asset quality metrics remained strong at June 30, 2018. Annualized net charge-offs as a percent of average loans for the second quarter of 2018 were 0.10%, compared to (0.01%) (a net recovery) for the first quarter of 2018, and 0.00% for the second quarter of 2017. At June 30, 2018, the Company’s nonperforming assets, which include nonaccrual loans and other real estate owned, were $894,000, or 0.05% of total assets, as compared to $1.4 million, 0.08% of total assets, at March 31, 2018, and $3.7 million, 0.25% of total assets, at June 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, Inc.Bridgewater Bank currently operates through 6 branches in Bloomington, Greenwood, Minneapolis (2), St. Louis Park, and Orono, 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. General 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.

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

Source: Bridgewater Bancshares, Inc.