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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ________

Commission File Number 001-38412

BRIDGEWATER BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

Minnesota
(State or other jurisdiction of
incorporation or organization)

26-0113412
(I.R.S. Employer
Identification No.)

4450 Excelsior Boulevard, Suite 100
St. Louis Park, Minnesota
(Address of principal executive offices)

55416
(Zip Code)

(952893-6868

(Registrant’s telephone number, including area code)

. Securities registered pursuant to Section 12(b) of the Act:

Title of each class: 

      

Trading Symbol 

    

Name of each exchange on which registered: 

Common Stock, $0.01 Par Value 

 

BWB

 

The Nasdaq Stock Market LLC 

Depositary Shares, each representing a 1/100th interest in a share of 5.875% Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share

BWBBP

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

  

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

The number of shares of the Common Stock outstanding as of October 31, 2023 was 28,000,570.

Table of Contents

PART I FINANCIAL INFORMATION

3

Item 1. Consolidated Financial Statements (unaudited)

3

Consolidated Balance Sheets

3

Consolidated Statements of Income

4

Consolidated Statements of Comprehensive Income

5

Consolidated Statements of Shareholders’ Equity

6

Consolidated Statements of Cash Flows

8

Notes to Consolidated Financial Statements

9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

39

Item 3. Quantitative and Qualitative Disclosures About Market Risk

67

Item 4. Controls and Procedures

69

PART II OTHER INFORMATION

70

Item 1. Legal Proceedings

70

Item 1A. Risk Factors

70

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

70

Item 3. Defaults Upon Senior Securities

71

Item 4. Mine Safety Disclosures

71

Item 5. Other Information

71

Item 6. Exhibits

71

SIGNATURES

72

2

PART 1 – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Bridgewater Bancshares, Inc. and Subsidiaries

Consolidated Balance Sheets

(dollars in thousands, except share data)

September 30, 

December 31, 

    

2023

    

2022

(Unaudited)

ASSETS

Cash and Cash Equivalents

$

124,358

$

87,043

Bank-Owned Certificates of Deposit

 

1,225

 

1,181

Securities Available for Sale, at Fair Value

 

553,076

 

548,613

Loans, Net of Allowance for Credit Losses of $50,585 at September 30, 2023 (unaudited) and $47,996 at December 31, 2022

3,664,464

 

3,512,157

Federal Home Loan Bank (FHLB) Stock, at Cost

 

17,056

 

19,606

Premises and Equipment, Net

 

49,331

 

48,445

Accrued Interest

 

15,182

 

13,479

Goodwill

 

2,626

 

2,626

Other Intangible Assets, Net

 

197

 

288

Bank-Owned Life Insurance

34,209

33,485

Other Assets

 

95,346

 

78,739

Total Assets

$

4,557,070

$

4,345,662

LIABILITIES AND EQUITY

 

  

 

  

LIABILITIES

 

  

 

  

Deposits:

 

  

 

  

Noninterest Bearing

$

754,297

$

884,272

Interest Bearing

 

2,921,212

 

2,532,271

Total Deposits

 

3,675,509

 

3,416,543

Federal Funds Purchased

 

 

287,000

Notes Payable

13,750

13,750

FHLB Advances

 

294,500

 

97,000

Subordinated Debentures, Net of Issuance Costs

 

79,192

 

78,905

Accrued Interest Payable

 

3,816

 

2,831

Other Liabilities

 

74,343

 

55,569

Total Liabilities

 

4,141,110

 

3,951,598

SHAREHOLDERS' EQUITY

 

  

 

  

Preferred Stock- $0.01 par value; Authorized 10,000,000

Preferred Stock - Issued and Outstanding 27,600 Series A shares ($2,500 liquidation preference) at September 30, 2023 (unaudited) and December 31, 2022

66,514

 

66,514

Common Stock- $0.01 par value; Authorized 75,000,000

 

 

Common Stock - Issued and Outstanding 28,015,505 at September 30, 2023 (unaudited) and 27,751,950 at December 31, 2022

280

 

278

Additional Paid-In Capital

 

100,120

 

96,529

Retained Earnings

 

272,812

 

248,685

Accumulated Other Comprehensive Loss

 

(23,766)

 

(17,942)

Total Shareholders' Equity

 

415,960

 

394,064

Total Liabilities and Equity

$

4,557,070

$

4,345,662

See accompanying notes to consolidated financial statements.

3

Bridgewater Bancshares, Inc. and Subsidiaries

Consolidated Statements of Income

(dollars in thousands, except per share data)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

September 30, 

September 30, 

    

2023

    

2022

    

2023

    

2022

INTEREST INCOME

 

  

 

  

 

  

 

  

Loans, Including Fees

$

48,999

$

37,666

$

141,675

$

103,768

Investment Securities

 

6,507

 

4,372

 

18,962

 

10,567

Other

 

1,303

 

321

 

3,165

 

500

Total Interest Income

 

56,809

 

42,359

 

163,802

 

114,835

INTEREST EXPENSE

 

 

 

 

Deposits

 

27,225

 

5,984

 

66,597

12,598

Notes Payable

 

296

 

 

844

FHLB Advances

 

2,316

 

329

 

5,269

646

Subordinated Debentures

 

1,003

 

1,242

 

2,979

3,658

Federal Funds Purchased

 

548

 

709

 

8,253

1,128

Total Interest Expense

 

31,388

 

8,264

 

83,942

 

18,030

NET INTEREST INCOME

 

25,421

 

34,095

 

79,860

 

96,805

Provision for (Recovery of) Credit Losses

 

(600)

 

1,500

 

75

6,200

NET INTEREST INCOME AFTER

 

  

 

  

 

  

 

  

PROVISION FOR CREDIT LOSSES

 

26,021

 

32,595

 

79,785

 

90,605

NONINTEREST INCOME

 

  

 

  

 

  

 

  

Customer Service Fees

 

379

313

 

1,096

892

Net Gain (Loss) on Sales of Available for Sale Securities

 

 

(6)

52

Other Income

 

1,347

1,074

 

3,994

3,650

Total Noninterest Income

 

1,726

 

1,387

 

5,084

 

4,594

NONINTEREST EXPENSE

 

  

 

  

 

  

 

  

Salaries and Employee Benefits

 

9,519

9,449

 

26,923

27,120

Occupancy and Equipment

 

1,101

1,086

 

3,385

3,213

Other Expense

 

4,730

3,622

 

13,613

11,084

Total Noninterest Expense

 

15,350

 

14,157

 

43,921

 

41,417

INCOME BEFORE INCOME TAXES

 

12,397

 

19,825

 

40,948

 

53,782

Provision for Income Taxes

 

2,768

 

5,312

 

9,861

 

14,125

NET INCOME

9,629

14,513

31,087

39,657

Preferred Stock Dividends

(1,013)

(1,013)

(3,040)

(3,040)

NET INCOME AVAILABLE TO COMMON SHAREHOLDERS

$

8,616

$

13,500

$

28,047

$

36,617

EARNINGS PER SHARE

 

 

  

 

  

 

Basic

$

0.31

$

0.49

$

1.01

$

1.32

Diluted

0.30

0.47

0.99

1.27

See accompanying notes to consolidated financial statements.

4

Bridgewater Bancshares, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(dollars in thousands)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2023

    

2022

    

2023

    

2022

Net Income

$

9,629

$

14,513

$

31,087

$

39,657

Other Comprehensive Loss:

 

 

Unrealized Losses on Available for Sale Securities

(10,151)

(18,073)

(14,338)

(56,487)

Unrealized Gains on Cash Flow Hedges

7,763

7,725

10,167

21,117

Reclassification Adjustment for (Gains) Losses Realized in Income

(1,623)

(119)

(4,004)

511

Income Tax Impact

1,153

4,808

2,351

9,133

Total Other Comprehensive Loss, Net of Tax

(2,858)

(5,659)

(5,824)

(25,726)

Comprehensive Income

$

6,771

$

8,854

$

25,263

$

13,931

See accompanying notes to consolidated financial statements.

5

Bridgewater Bancshares, Inc. and Subsidiaries

Consolidated Statements of Shareholders’ Equity

Three and Nine Months Ended September 30, 2023 and 2022

(dollars in thousands, except share data)

(Unaudited)

Accumulated

Additional

Other

Preferred

Common Stock

Paid-In

Retained

Comprehensive

Three Months Ended

Stock

    

Shares

    

Amount

    

Capital

    

Earnings

    

Loss

    

Total

BALANCE June 30, 2022

 

$

66,514

27,677,372

$

277

$

96,689

$

222,464

$

(11,061)

$

374,883

Stock-based Compensation

 

4,744

876

 

876

Comprehensive Income (Loss)

 

14,513

(5,659)

 

8,854

Stock Options Exercised

3,250

41

41

Stock Repurchases

(99,310)

(1)

(1,615)

(1,616)

Vested Restricted Stock Units

3,000

Restricted Shares Withheld for Taxes

(1,078)

(18)

(18)

Preferred Stock Dividend

(1,013)

(1,013)

BALANCE September 30, 2022

 

$

66,514

27,587,978

$

276

$

95,973

$

235,964

$

(16,720)

$

382,007

BALANCE June 30, 2023

 

$

66,514

27,973,995

$

280

$

99,044

$

264,196

$

(20,908)

$

409,126

Stock-based Compensation

 

12,588

997

 

997

Comprehensive Income (Loss)

 

9,629

(2,858)

 

6,771

Stock Options Exercised

27,000

90

90

Vested Restricted Stock Units

3,000

Restricted Shares Withheld for Taxes

(1,078)

(11)

(11)

Preferred Stock Dividend

(1,013)

(1,013)

BALANCE September 30, 2023

 

$

66,514

28,015,505

$

280

$

100,120

$

272,812

$

(23,766)

$

415,960

See accompanying notes to consolidated financial statements.

6

Accumulated

Additional

Other

Preferred

Common Stock

Paid-In

Retained

Comprehensive

Nine Months Ended

    

Stock

    

Shares

    

Amount

    

Capital

    

Earnings

    

Income (Loss)

    

Total

BALANCE December 31, 2021

 

$

66,514

28,206,566

$

282

$

104,123

$

199,347

$

9,006

$

379,272

Stock-based Compensation

 

14,400

2,557

 

2,557

Comprehensive Income (Loss)

 

39,657

(25,726)

 

13,931

Stock Options Exercised

28,000

106

106

Stock Repurchases

(662,765)

(6)

(10,772)

(10,778)

Forfeiture of Restricted Stock Awards

(1,000)

(3)

(3)

Vested Restricted Stock Units

5,100

Restricted Shares Withheld for Taxes

(2,323)

(38)

(38)

Preferred Stock Dividend

(3,040)

(3,040)

BALANCE September 30, 2022

 

$

66,514

27,587,978

$

276

$

95,973

$

235,964

$

(16,720)

$

382,007

BALANCE December 31, 2022

$

66,514

27,751,950

$

278

$

96,529

$

248,685

$

(17,942)

$

394,064

Cumulative Effect of Change in Accounting Principle, Net of Tax

(3,920)

(3,920)

Balance as of January 1, 2023, as Adjusted for Change in Accounting Principle

66,514

27,751,950

278

96,529

244,765

(17,942)

390,144

Stock-based Compensation

 

35,460

2,910

 

2,910

Comprehensive Income (Loss)

 

31,087

(5,824)

 

25,263

Stock Options Exercised

226,000

2

715

717

Forfeiture of Restricted Stock Awards

(250)

Vested Restricted Stock Units

5,225

Restricted Shares Withheld for Taxes

(2,880)

(34)

(34)

Preferred Stock Dividend

(3,040)

(3,040)

BALANCE September 30, 2023

 

$

66,514

28,015,505

$

280

$

100,120

$

272,812

$

(23,766)

$

415,960

See accompanying notes to consolidated financial statements.

7

Bridgewater Bancshares, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(dollars in thousands)

(Unaudited)

Nine Months Ended

September 30, 

2023

2022

CASH FLOWS FROM OPERATING ACTIVITIES

Net Income

$

31,087

$

39,657

Adjustments to Reconcile Net Income to Net Cash

 

 

Provided by Operating Activities:

 

 

Net Amortization on Securities Available for Sale

 

196

 

1,712

Net (Gain) Loss on Sales of Securities Available for Sale

 

6

 

(52)

Provision for Credit Losses on Loans

 

2,050

 

6,200

Credit for Off-Balance Sheet Exposures

(1,975)

Depreciation of Premises and Equipment

 

1,901

 

1,911

Amortization of Other Intangible Assets

 

91

 

143

Amortization of Right-of Use Asset

396

Amortization of Subordinated Debt Issuance Costs

287

320

Stock-based Compensation

 

2,910

 

2,557

Changes in Operating Assets and Liabilities:

 

 

Accrued Interest Receivable and Other Assets

 

(8,923)

 

(7,859)

Accrued Interest Payable and Other Liabilities

 

10,457

 

35,780

Net Cash Provided by Operating Activities