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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, 2022

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 November 1, 2022 was 27,590,978.

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

7

Notes to Consolidated Financial Statements

8

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

32

Item 3. Quantitative and Qualitative Disclosures About Market Risk

62

Item 4. Controls and Procedures

64

PART II OTHER INFORMATION

65

Item 1. Legal Proceedings

65

Item 1A. Risk Factors

65

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

66

Item 3. Defaults Upon Senior Securities

66

Item 4. Mine Safety Disclosures

66

Item 5. Other Information

67

Item 6. Exhibits

67

SIGNATURES

68

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, 

    

2022

    

2021

(Unaudited)

ASSETS

Cash and Cash Equivalents

$

75,496

$

143,473

Bank-Owned Certificates of Deposit

 

1,182

 

1,876

Securities Available for Sale, at Fair Value

 

542,007

 

439,362

Loans, Net of Allowance for Loan Losses of $46,491 at September 30, 2022 (unaudited) and $40,020 at December 31, 2021

3,324,503

 

2,769,917

Federal Home Loan Bank (FHLB) Stock, at Cost

 

15,603

 

5,242

Premises and Equipment, Net

 

48,941

 

49,395

Accrued Interest

 

11,198

 

9,186

Goodwill

 

2,626

 

2,626

Other Intangible Assets, Net

 

336

 

479

Other Assets

 

107,095

 

56,103

Total Assets

$

4,128,987

$

3,477,659

LIABILITIES AND EQUITY

 

  

 

  

LIABILITIES

 

  

 

  

Deposits:

 

  

 

  

Noninterest Bearing

$

961,084

$

875,084

Interest Bearing

 

2,343,990

 

2,071,153

Total Deposits

 

3,305,074

 

2,946,237

Federal Funds Purchased

 

212,000

 

FHLB Advances

 

71,500

 

42,500

Subordinated Debentures, Net of Issuance Costs

 

92,559

 

92,239

Accrued Interest Payable

 

2,214

 

1,409

Other Liabilities

 

63,633

 

16,002

Total Liabilities

 

3,746,980

 

3,098,387

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, 2022 (unaudited) and December 31, 2021

66,514

 

66,514

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

 

 

Common Stock - Issued and Outstanding 27,587,978 at September 30, 2022 (unaudited) and 28,206,566 at December 31, 2021

276

 

282

Additional Paid-In Capital

 

95,973

 

104,123

Retained Earnings

 

235,964

 

199,347

Accumulated Other Comprehensive Income (Loss)

 

(16,720)

 

9,006

Total Shareholders' Equity

 

382,007

 

379,272

Total Liabilities and Equity

$

4,128,987

$

3,477,659

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, 

June 30,

September 30, 

September 30, 

September 30, 

    

2022

    

2022

    

2021

    

2022

    

2021

INTEREST INCOME

 

  

 

 

  

 

  

 

  

Loans, Including Fees

$

37,666

$

34,358

$

31,049

$

103,768

$

87,705

Investment Securities

 

4,372

 

3,325

 

2,333

 

10,567

 

7,065

Other

 

321

 

99

 

135

 

500

 

334

Total Interest Income

 

42,359

 

37,782

 

33,517

 

114,835

 

95,104

INTEREST EXPENSE

 

 

 

 

 

Deposits

 

5,984

 

3,456

 

3,417

 

12,598

10,601

Notes Payable

 

 

 

 

61

FHLB Advances

 

329

 

167

 

213

 

646

669

Subordinated Debentures

 

1,242

 

1,219

 

1,214

 

3,658

3,411

Federal Funds Purchased

 

709

 

410

 

 

1,128

6

Total Interest Expense

 

8,264

 

5,252

 

4,844

 

18,030

 

14,748

NET INTEREST INCOME

 

34,095

 

32,530

 

28,673

 

96,805

 

80,356

Provision for Loan Losses

 

1,500

 

3,025

 

1,300

 

6,200

4,000

NET INTEREST INCOME AFTER

 

  

 

  

 

  

 

  

 

  

PROVISION FOR LOAN LOSSES

 

32,595

 

29,505

 

27,373

 

90,605

 

76,356

NONINTEREST INCOME

 

  

 

  

 

  

 

  

 

  

Customer Service Fees

 

313

 

298

268

 

892

733

Net Gain on Sales of Available for Sale Securities

 

 

52

48

 

52

750

Other Income

 

1,074

 

1,300

1,094

 

3,650

2,538

Total Noninterest Income

 

1,387

 

1,650

 

1,410

 

4,594

 

4,021

NONINTEREST EXPENSE

 

  

 

  

 

  

 

  

 

  

Salaries and Employee Benefits

 

9,449

 

8,977

8,309

 

27,120

22,923

Occupancy and Equipment

 

1,086

 

1,042

942

 

3,213

2,977

Other Expense

 

3,622

 

3,733

3,985

 

11,084

9,736

Total Noninterest Expense

 

14,157

 

13,752

 

13,236

 

41,417

 

35,636

INCOME BEFORE INCOME TAXES

 

19,825

 

17,403

 

15,547

 

53,782

 

44,741

Provision for Income Taxes

 

5,312

 

4,521

 

4,038

 

14,125

 

11,568

NET INCOME

14,513

12,882

11,509

39,657

33,173

Preferred Stock Dividends

(1,013)

(1,014)

(3,040)

NET INCOME AVAILABLE TO COMMON SHAREHOLDERS

$

13,500

$

11,868

$

11,509

$

36,617

$

33,173

EARNINGS PER SHARE

 

  

  

 

  

 

  

 

Basic

$

0.49

$

0.43

$

0.41

$

1.32

$

1.18

Diluted

0.47

0.41

0.40

1.27

1.14

4

See accompanying notes to consolidated financial statements.

Bridgewater Bancshares, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(dollars in thousands)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2022

    

2021

    

2022

    

2021

Net Income

$

14,513

$

11,509

$

39,657

$

33,173

Other Comprehensive Income (Loss):

 

 

Unrealized Gains (Losses) on Available for Sale Securities

(18,073)

(237)

(56,487)

114

Unrealized Gains (Losses) on Cash Flow Hedges

7,725

242

21,117

3,295

Reclassification Adjustment for (Gains) Losses Realized in Income

(119)

358

511

329

Income Tax Impact

4,808

(73)

9,133

(785)

Total Other Comprehensive Income (Loss), Net of Tax

(5,659)

290

(25,726)

2,953

Comprehensive Income

$

8,854

$

11,799

$

13,931

$

36,126

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, 2022 and 2021

(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

    

Income (Loss)

    

Total

BALANCE June 30, 2021

 

$

28,162,777

$

282

$

104,811

$

176,495

$

9,242

$

290,830

Stock-based Compensation

 

4,552

608

 

608

Comprehensive Income (Loss)

 

11,509

290

 

11,799

Preferred Stock Offering, Net of Issuance Costs

66,515

66,515

Stock Options Exercised

26,000

89

89

Stock Repurchases

(126,507)

(1)

(2,037)

(2,038)

BALANCE September 30, 2021

 

$

66,515

28,066,822

$

281

$

103,471

$

188,004

$

9,532

$

367,803

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

Accumulated

Additional

Other

Preferred

Common Stock

Paid-In

Retained

Comprehensive

Nine Months Ended

    

Stock

    

Shares

    

Amount

    

Capital

    

Earnings

    

Income (Loss)

    

Total

BALANCE December 31, 2020

 

$

28,143,493

$

281

$

103,714

$

154,831

$

6,579

$

265,405

Stock-based Compensation

 

14,408

1,765

 

1,765

Comprehensive Income

 

33,173

 

2,953

 

36,126

Preferred Stock Offering, Net of Issuance Costs

66,515

66,515

Stock Options Exercised

52,400

1

242

243

Stock Repurchases

(143,125)

(1)

(2,245)

(2,246)

Restricted Shares Withheld for Taxes

(354)

(5)

(5)

BALANCE September 30, 2021

 

$

66,515

28,066,822

$

281

$

103,471

$

188,004

$

9,532

$

367,803

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

See accompanying notes to consolidated financial statements.

6

Bridgewater Bancshares, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(dollars in thousands)

(Unaudited)

Nine Months Ended

September 30, 

2022

2021

CASH FLOWS FROM OPERATING ACTIVITIES

Net Income

$

39,657

$

33,173

Adjustments to Reconcile Net Income to Net Cash

 

 

Provided by Operating Activities:

 

 

Net Amortization on Securities Available for Sale

 

1,712

 

2,567

Net Gain on Sales of Securities Available for Sale

 

(52)

 

(750)

Provision for Loan Losses

 

6,200

 

4,000

Depreciation of Premises and Equipment

 

1,911

 

1,755

Amortization of Other Intangible Assets

 

143

 

143

Amortization of Subordinated Debt Issuance Costs

320

299

Stock-based Compensation

 

2,557

 

1,765

Changes in Operating Assets and Liabilities:

 

 

Accrued Interest Receivable and Other Assets

 

(7,859)

 

(6,957)

Accrued Interest Payable and Other Liabilities

 

35,780

 

7,876

Net Cash Provided by Operating Activities

 

80,369

 

43,871

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

Decrease in Bank-Owned Certificates of Deposit

 

694

983

Proceeds from Sales of Securities Available for Sale

 

25,066

11,877

Proceeds from Maturities, Paydowns, Payups and Calls of Securities Available for Sale

 

30,253

33,250

Purchases of Securities Available for Sale

 

(210,432)

(64,669)

Net Increase in Loans

 

(560,786)

(384,476)

Net Increase in FHLB Stock

 

(10,361)

(415)

Purchases of Premises and Equipment

 

(1,457)

(571)

Purchase of Bank-Owned Life Insurance

(7,407)

(25,166)

Net Cash Used in Investing Activities

(734,430)

 

(429,187)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

Net Increase in Deposits

 

358,837

352,521

Net Increase in Federal Funds Purchased

212,000

Principal Payments on Notes Payable

 

(11,000)

Proceeds from FHLB Advances

 

29,000

Principal Payments on FHLB Advances

(10,000)

Issuance of Preferred Stock, net of Issuance Costs

66,515

Preferred Stock Dividends Paid

(3,040)

Issuance of Subordinated Debt, net of Issuance Costs

29,365<