Second Quarter 2024 Highlights

• Tangible book value per share⁽¹⁾ of $13.53 for the second quarter of 2024, an increase of $0.32, or 9.8% annualized, compared to $13.20 for the first quarter of 2024.
• Net interest income increased $365,000, or 1.5%, from the first quarter of 2024, the first quarter-over-quarter increase since the third quarter of 2022.
• Net interest margin (on a fully tax-equivalent basis) of 2.24% for the second quarter of 2024, in line with the first quarter of 2024.
• Loan-to-deposit ratio of 99.8%, compared to 99.4% at March 31, 2024.
• Gross loans increased $16.2 million, or 1.7% annualized, from the first quarter of 2024. On a year-to-date basis, gross loans increased $76.1 million, or 4.1% annualized.
• Deposits increased by $487,000, or 0.1% annualized, from the first quarter of 2024. On a year-to-date basis, deposits increased by $97.8 million, or 5.3% annualized, and core deposits⁽²⁾ increased by $37.6 million, or 3.0% annualized.
• Efficiency ratio⁽¹⁾ of 58.7%, compared to 58.2% for the first quarter of 2024.
• A provision for credit losses on loans of $600,000 was recorded in the second quarter of 2024. The allowance for credit losses on loans to total loans was 1.37% at June 30, 2024, compared to 1.36% at March 31, 2024.
• Annualized net loan charge-offs as a percentage of average loans of 0.00% for the second quarter of 2024, in line with the first quarter of 2024.
• Nonperforming assets to total assets of 0.01% at both June 30, 2024 and March 31, 2024.
• Repurchased 252,707 shares of common stock at a weighted average price of $11.48 per share, for a total of $2.9 million.

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

⁽²⁾ Core deposits are defined as total deposits less brokered deposits and certificates of deposit greater than $250,000.

Bridgewater Bancshares, Inc. (Nasdaq: BWB) (the Company), the parent company of Bridgewater Bank (the Bank), today announced net income of $8.1 million for the second quarter of 2024, compared to $7.8 million for the first quarter of 2024, and $9.8 million for the second quarter of 2023. Earnings per diluted common share were $0.26 for the second quarter of 2024, compared to $0.24 for the first quarter of 2024, and $0.31 for the second quarter of 2023.

“Bridgewater saw positive profitability momentum during the second quarter as total revenue and net interest income both increased for the first time since the third quarter of 2022,” said Chairman and Chief Executive Officer, Jerry Baack. “We were pleased to see net interest margin hold steady as loan portfolio repricing increased. Meanwhile, the pace of balance sheet growth year-to-date remained on track with expectations, despite more moderated growth in the second quarter.

“Asset quality was superb once again as our Twin Cities-focused commercial real estate and multifamily portfolios continued to perform well despite a challenging environment. In addition, our unique corporate culture and responsive service model continued to shine as Bridgewater was recognized as a top workplace by the Star Tribune. Our ongoing focus on executing on our business model, serving our clients, and driving shareholder value over time, have now resulted in 30 consecutive quarters of tangible book value per share growth.”

Key Financial Measures

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Income Statement

Net Interest Margin and Net Interest Income

Net interest margin (on a fully tax-equivalent basis) for the second quarter of 2024 was 2.24%, stable with 2.24% in the first quarter of 2024, and a 16 basis point decline from 2.40% in the second quarter of 2023. Core net interest margin (on a fully tax-equivalent basis), a non-GAAP financial measure which excludes the impact of loan fees, was 2.17% for the second quarter of 2024, a one basis point decline from 2.18% in the first quarter of 2024, and a 14 basis point decline from 2.31% in the second quarter of 2023.

• The linked-quarter margin remained stable.
• The year-over-year decline in the margin was primarily due to higher funding costs, offset partially by higher earning asset yields.

Net interest income was $25.0 million for the second quarter of 2024, an increase of $365,000 from $24.6 million in the first quarter of 2024, and a decrease of $876,000 from $25.9 million in the second quarter of 2023.

• The linked-quarter increase in net interest income was primarily due to growth and higher yields in the loan and securities portfolios.
• The year-over year decrease in net interest income was primarily due to higher rates paid on deposits and growth in the rising interest rate environment, which outpaced the repricing of the loan and securities portfolios.

Interest income was $60.9 million for the second quarter of 2024, an increase of $2.2 million from $58.7 million in the first quarter of 2024, and an increase of $5.9 million from $55.0 million in the second quarter of 2023.

• The yield on interest earning assets (on a fully tax-equivalent basis) was 5.41% in the second quarter of 2024, compared to 5.28% in the first quarter of 2024 and 5.06% in the second quarter of 2023.
• The linked-quarter increase in the yield on interest earning assets was primarily due to growth and repricing of the loan portfolio at yields accretive to the existing portfolio.
• The year-over-year increase in the yield on interest earning assets was primarily due to the purchase of higher yielding securities and the growth and repricing of the loan and securities portfolios in the rising interest rate environment.
• Loan interest income and loan fees remain the primary contributing factors to the changes in the yield on interest earning assets. The aggregate loan yield increased to 5.50% in the second quarter of 2024, 12 basis points higher than 5.38% in the first quarter of 2024, and 31 basis points higher than 5.19% in the second quarter of 2023.
• The core loan yield continues to rise as new loan originations and the existing portfolio reprice in the higher rate environment.

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

Interest expense was $35.9 million for the second quarter of 2024, an increase of $1.8 million from $34.0 million in the first quarter of 2024, and an increase of $6.8 million from $29.1 million in the second quarter of 2023.

• The cost of interest bearing liabilities was 4.19% in the second quarter of 2024, compared to 4.03% in the first quarter of 2024 and 3.59% in the second quarter of 2023.
• The linked-quarter increase in the cost of interest bearing liabilities was primarily due to higher rates paid on deposits and an increase in the utilization of overnight borrowings.
• The year-over-year increase in the cost of interest bearing liabilities was primarily due to continued deposit repricing in the higher rate environment.

Interest expense on deposits was $31.6 million for the second quarter of 2024, an increase of $1.4 million from $30.2 million in the first quarter of 2024, and an increase of $8.6 million from $23.0 million in the second quarter of 2023.

• The cost of total deposits was 3.46% in the second quarter of 2024, compared to 3.32% in the first quarter of 2024 and 2.66% in the second quarter of 2023.
• The linked-quarter increase in the cost of total deposits was primarily due to continued client demand for higher interest rates, increased competition, and changes in the mix of deposits.
• The year-over-year increase in the cost of total deposits was primarily due to upward repricing of the deposit portfolio in the higher interest rate environment.

Provision for Credit Losses

The provision for credit losses on loans was $600,000 for the second quarter of 2024, compared to $850,000 for the first quarter of 2024 and $550,000 for the second quarter of 2023.

• The provision for credit losses on loans recorded in the second quarter of 2024 was primarily attributable to changes in the mix of the loan portfolio.
• The allowance for credit losses on loans to total loans was 1.37% at June 30, 2024, compared to 1.36% at both March 31, 2024 and June 30, 2023.

There was no provision for credit losses for off-balance sheet credit exposures for the second quarter of 2024, compared to a negative provision of $100,000 for the first quarter of 2024 and a negative provision of $500,000 for the second quarter of 2023.

• No provision was recorded during the second quarter of 2024 due to unfunded commitments remaining stable as the migration to funded loans was offset by the volume of newly originated loans with unfunded commitments.

Noninterest Income

Noninterest income was $1.8 million for the second quarter of 2024, an increase of $213,000 from $1.6 million for the first quarter of 2024 and an increase of $348,000 from $1.4 million for the second quarter of 2023.

• The linked-quarter increase was primarily due to a net gain on sale of securities and higher letter of credit fees, offset partially by a decrease in other income.
• The year-over-year increase was primarily due to a net gain on sale of securities and an increase in the cash surrender value of bank-owned life insurance.

Noninterest Expense

Noninterest expense was $15.5 million for the second quarter of 2024, an increase of $350,000 from $15.2 million for the first quarter of 2024 and an increase of $1.3 million from $14.3 million for the second quarter of 2023.

• The linked-quarter increase was primarily due to increases in salaries and employee benefits and other expense, offset partially by a decrease in the FDIC insurance assessment.
• The year-over-year increase was primarily attributable to increases in salaries and employee benefits, higher derivative collateral fees and information technology and telecommunications, offset partially by a decrease in the FDIC insurance assessment.
• The efficiency ratio, a non-GAAP financial measure, was 58.7% for the second quarter of 2024, compared to 58.2% for the first quarter of 2024, and 52.3% for the second quarter of 2023.
• The Company had 258 full-time equivalent employees at June 30, 2024, compared to 255 employees at March 31, 2024, and 253 employees at June 30, 2023.

Income Taxes

The effective combined federal and state income tax rate for the second quarter of 2024 was 23.6%, a slight increase from 23.5% for the first quarter of 2024 and an increase from 24.3% for the second quarter of 2023.

Balance Sheet

Loans

Total gross loans at June 30, 2024 were $3.80 billion, an increase of $16.2 million, or 1.7% annualized, over total gross loans of $3.78 billion at March 31, 2024, and an increase of $64.2 million, or 1.7%, over total gross loans of $3.74 billion at June 30, 2023.

• The increase in the loan portfolio during the second quarter of 2024 was due to increased loan originations, partially offset by elevated loan payoffs. The loan portfolio composition remained relatively stable during the quarter with the exception of the construction and land development portfolio which decreased.

Deposits

Total deposits at June 30, 2024 were $3.81 billion, an increase of $487,000, over total deposits of $3.81 billion at March 31, 2024, and an increase of $229.8 million, or 6.4%, over total deposits of $3.58 billion at June 30, 2023.

• Core deposits, defined as total deposits excluding brokered deposits and time deposits greater than $250,000, decreased $52.7 million from the first quarter of 2024. Growth in core deposits can fluctuate from quarter to quarter, as deposit growth is not always linear. On a year-to-date basis, core deposits increased by $37.6 million, or 3.0% annualized.
• Brokered deposits continue to be used as a supplemental funding source, as needed.
• Uninsured deposits were 23% of total deposits as of June 30, 2024, compared to 26% of total deposits as of March 31, 2024.

Liquidity

Total on- and off-balance sheet liquidity was $2.22 billion as of June 30, 2024, compared to $2.25 billion at March 31, 2024 and $1.96 billion at June 30, 2023.

Asset Quality

Overall asset quality remained superb due to the Company’s measured risk selection, consistent underwriting standards, active credit oversight, and experienced lending and credit teams.

• Annualized net charge-offs as a percentage of average loans were 0.00% for each of the second quarter of 2024, the first quarter of 2024 and the second quarter of 2023.
• At June 30, 2024, the Company’s nonperforming assets, which include nonaccrual loans, loans past due 90 days and still accruing, and foreclosed assets, were $678,000, or 0.01% of total assets, compared to $269,000, or 0.01%, of total assets at March 31, 2024, and $778,000, or 0.02%, of total assets at June 30, 2023.
• Loans with potential weaknesses that warranted a watchlist risk rating at June 30, 2024 totaled $30.4 million, compared to $21.6 million at March 31, 2024, and $27.2 million at June 30, 2023.
• Loans that warranted a substandard risk rating at June 30, 2024 totaled $33.9 million, compared to $33.8 million at March 31, 2024, and $33.8 million at June 30, 2023.

Capital

Total shareholders’ equity at June 30, 2024 was $439.2 million, an increase of $5.6 million, or 1.3%, compared to total shareholders’ equity of $433.6 million at March 31, 2024, and an increase of $30.1 million, or 7.4%, over total shareholders’ equity of $409.1 million at June 30, 2023.

• The linked-quarter increase was primarily due to net income retained, offset partially by preferred stock dividends and stock repurchases.
• The year-over-year increase was due to net income retained and a decrease in unrealized losses in the securities portfolio, offset partially by a decrease in unrealized gains in the derivatives portfolio, preferred stock dividends, and stock repurchases.
• The Common Equity Tier 1 Risk-Based Capital Ratio was 9.41% at June 30, 2024, compared to 9.21% at March 31, 2024 and 8.72% at June 30, 2023.
• Tangible common equity as a percentage of tangible assets, a non-GAAP financial measure, was 7.90% at June 30, 2024, compared to 7.72% at March 31, 2024, and 7.39% at June 30, 2023.

Tangible book value per share, a non-GAAP financial measure, was $13.53 as of June 30, 2024, an increase of 2.4% from $13.20 as of March 31, 2024, and an increase of 11.4% from $12.15 as of June 30, 2023.

• The Company has increased tangible book value per share each of the past 30 quarters.

During the second quarter of 2024, the Company repurchased 252,707 shares of its common stock. Shares were repurchased at a weighted average price of $11.48 per share, for a total of $2.9 million.

• The Company has $15.3 million remaining under its current share repurchase authorization.
• On July 23, 2024, the Board of Directors ​​​​​​​​​​​extended the expiration date of the current share repurchase authorization from August 16, 2024 to August ​20, 2025.

Today, the Company also announced that its Board of Directors has declared a quarterly cash dividend on its 5.875% Non-Cumulative Perpetual Preferred Stock, Series A (Series A Preferred Stock). The quarterly cash dividend of $36.72 per share, equivalent to $0.3672 per depositary share, each representing a 1/100th interest in a share of the Series A Preferred Stock (Nasdaq: BWBBP), is payable on September 3, 2024 to shareholders of record of the Series A Preferred Stock at the close of business on August 15, 2024.

Conference Call and Webcast

The Company will host a conference call to discuss its second quarter 2024 financial results on Thursday, July 25, 2024 at 8:00 a.m. Central Time. The conference call can be accessed by dialing 844-481-2913 and requesting to join the Bridgewater Bancshares earnings call. To listen to a replay of the conference call via phone, please dial 877-344-7529 and enter access code 3041856. The replay will be available through August 1, 2024. The conference call will also be available via a live webcast on the Investor Relations section of the Company’s website, investors.bridgewaterbankmn.com, and archived for replay.

About the Company

Bridgewater Bancshares, Inc. (Nasdaq: BWB) is a St. Louis Park, Minnesota-based financial holding company. Bridgewater's banking subsidiary, Bridgewater Bank, is a premier, full-service Twin Cities bank dedicated to serving the diverse needs of commercial real estate investors, entrepreneurs, business clients and successful individuals. By pairing a range of deposit, lending, and treasury management solutions with a responsive service model, Bridgewater has seen continuous growth and profitability. With total assets of $4.7 billion and seven branches as of June 30, 2024, Bridgewater is considered one of the largest locally led banks in the State of Minnesota, and has received numerous awards for its growth, banking services, and esteemed corporate culture.

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 earnings 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: interest rate risk, including the effects of sustained high interest rates; fluctuations in the values of the securities held in our securities portfolio, including as the result of changes in interest rates; business and economic conditions generally and in the financial services industry, nationally and within our market area, including high rates of inflation and possible recession; the effects of developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time that resulted in recent bank failures; loan concentrations in our portfolio; the overall health of the local and national real estate market; our ability to successfully manage credit risk; our ability to maintain an adequate level of allowance for credit losses on loans; new or revised accounting standards; the concentration of large loans to certain borrowers; the concentration of large deposits from certain clients, who have balances above current FDIC insurance limits; our ability to successfully manage liquidity risk, which may increase our dependence on non-core funding sources such as brokered deposits, and negatively impact 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; talent and labor shortages and high rates of employee turnover; the occurrence of fraudulent activity, breaches or failures of our or our third-party vendors’ information security controls or cybersecurity-related incidents, including as a result of sophisticated attacks using artificial intelligence and similar tools; interruptions involving our information technology and telecommunications systems or third-party servicers; competition in the financial services industry, including from nonbank competitors such as credit unions and “fintech” companies; 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, including in response to the recent bank failures; risks related to climate change and the negative impact it may have on our customers and their businesses; the imposition of other governmental policies impacting the value of products produced by our commercial borrowers; severe weather, natural disasters, wide spread disease or pandemics, acts of war or terrorism or other adverse external events, including the ongoing Israeli-Palestinian conflict and the Russian invasion of Ukraine; potential impairment to the goodwill the Company recorded in connection with our past acquisition; changes to U.S. or state tax laws, regulations and guidance; potential changes in federal policy and at regulatory agencies as a result of the upcoming 2024 presidential election; and any other risks described in the “Risk Factors” sections of 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. The Company undertakes 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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