UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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
(Exact name of registrant as specified in its charter)
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(
(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: |
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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.
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).
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 | ☐ | ☒ | |
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
The number of shares of the Common Stock outstanding as of May 2, 2022 was
Table of Contents
2
PART 1 – FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Bridgewater Bancshares, Inc. and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands, except share data)
March 31, | December 31, | |||||
| 2022 |
| 2021 | |||
(Unaudited) | ||||||
ASSETS | ||||||
Cash and Cash Equivalents | $ | $ | | |||
Bank-Owned Certificates of Deposit |
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Securities Available for Sale, at Fair Value |
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Loans, Net of Allowance for Loan Losses of $ |
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Federal Home Loan Bank (FHLB) Stock, at Cost |
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Premises and Equipment, Net |
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Accrued Interest |
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Goodwill |
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Other Intangible Assets, Net |
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Other Assets |
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Total Assets | $ | | $ | | ||
LIABILITIES AND EQUITY |
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LIABILITIES |
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Deposits: |
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Noninterest Bearing | $ | $ | | |||
Interest Bearing |
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Total Deposits |
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Federal Funds Purchased |
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FHLB Advances |
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Subordinated Debentures, Net of Issuance Costs |
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Accrued Interest Payable |
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Other Liabilities |
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Total Liabilities |
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SHAREHOLDERS' EQUITY |
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Preferred Stock- $ | ||||||
Preferred Stock - Issued and Outstanding | |
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Common Stock- $ |
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Common Stock - Issued and | |
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Additional Paid-In Capital |
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Retained Earnings |
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Accumulated Other Comprehensive Income (Loss) |
| ( |
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Total Shareholders' Equity |
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Total Liabilities and Equity | $ | | $ | |
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 | ||||||
March 31, | March 31, | |||||
| 2022 |
| 2021 | |||
INTEREST INCOME |
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Loans, Including Fees | $ | | $ | | ||
Investment Securities |
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Other |
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Total Interest Income |
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INTEREST EXPENSE |
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Deposits |
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Notes Payable |
| — |
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FHLB Advances |
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Subordinated Debentures |
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Federal Funds Purchased |
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Total Interest Expense |
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NET INTEREST INCOME |
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Provision for Loan Losses |
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NET INTEREST INCOME AFTER |
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PROVISION FOR LOAN LOSSES |
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NONINTEREST INCOME |
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Customer Service Fees |
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Other Income |
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Total Noninterest Income |
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NONINTEREST EXPENSE |
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Salaries and Employee Benefits |
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Occupancy and Equipment |
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Other Expense |
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Total Noninterest Expense |
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INCOME BEFORE INCOME TAXES |
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Provision for Income Taxes |
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NET INCOME | | | ||||
Preferred Stock Dividends | ( | — | ||||
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS | $ | | $ | | ||
EARNINGS PER SHARE |
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Basic | $ | | $ | | ||
Diluted | | |
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 | ||||||
March 31, | ||||||
| 2022 |
| 2021 | |||
Net Income | $ | | $ | | ||
Other Comprehensive Income (Loss): |
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Unrealized Losses on Available for Sale Securities | ( | ( | ||||
Unrealized Gains on Cash Flow Hedges | | | ||||
Reclassification Adjustment for Losses Realized in Income | | | ||||
Income Tax Impact | | ( | ||||
Total Other Comprehensive Income (Loss), Net of Tax | ( | | ||||
Comprehensive Income | $ | | $ | |
See accompanying notes to consolidated financial statements.
5
Bridgewater Bancshares, Inc. and Subsidiaries
Consolidated Statements of Shareholders’ Equity
Three Months Ended March 31, 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 December 31, 2020 |
| $ | — | | $ | | $ | | $ | | $ | | $ | | ||||||
Stock-based Compensation |
| — | | — | | — | — |
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Comprehensive Income |
| — | — | — | — | | |
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Stock Options Exercised | — | | — | | — | — | | |||||||||||||
Stock Repurchases | — | ( | — | ( | — | — | ( | |||||||||||||
Issuance of Restricted Stock Awards | — | — | — | — | — | — | — | |||||||||||||
Restricted Shares Withheld for Taxes | — | ( | — | ( | — | — | ( | |||||||||||||
BALANCE March 31, 2021 |
| $ | — | | $ | | $ | | $ | | $ | | $ | | ||||||
BALANCE December 31, 2021 |
| $ | | | $ | | $ | | $ | | $ | | $ | | ||||||
Stock-based Compensation |
| — | | — | | — | — |
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Comprehensive Income (Loss) |
| — | — | — | — | | ( |
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Stock Options Exercised | — | | — | | — | — | | |||||||||||||
Stock Repurchases | — | ( | — | ( | — | — | ( | |||||||||||||
Forfeiture of Restricted Stock Awards | — | ( | — | ( | — | — | ( | |||||||||||||
Vested Restricted Stock Units | — | | — | — | — | — | — | |||||||||||||
Restricted Shares Withheld for Taxes | — | ( | — | ( | — | — | ( | |||||||||||||
Preferred Stock Dividend | — | — | — | — | ( | — | ( | |||||||||||||
BALANCE March 31, 2022 |
| $ | | | $ | | $ | | $ | | $ | ( | $ | | ||||||
See accompanying notes to consolidated financial statements.
6
Bridgewater Bancshares, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(dollars in thousands)
(Unaudited)
Three Months Ended | ||||||
March 31, | ||||||
2022 | 2021 | |||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||
Net Income | $ | | $ | | ||
Adjustments to Reconcile Net Income to Net Cash |
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Provided by Operating Activities: |
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Net Amortization on Securities Available for Sale |
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Provision for Loan Losses |
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Depreciation of Premises and Equipment |
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Amortization of Other Intangible Assets |
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Amortization of Subordinated Debt Issuance Costs | | | ||||
Stock-based Compensation |
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Changes in Operating Assets and Liabilities: |
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Accrued Interest Receivable and Other Assets |
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Accrued Interest Payable and Other Liabilities |
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Net Cash Provided by Operating Activities |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Decrease in Bank-Owned Certificates of Deposit |
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Proceeds from Sales of Securities Available for Sale |
| — | | |||
Proceeds from Maturities, Paydowns, Payups and Calls of Securities Available for Sale |
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Purchases of Securities Available for Sale |
| ( | ( | |||
Net Increase in Loans |
| ( | ( | |||
Net Increase in FHLB Stock |
| ( | ( | |||
Purchases of Premises and Equipment |
| ( | ( | |||
Net Cash Used in Investing Activities | ( |
| ( | |||
CASH FLOWS FROM FINANCING ACTIVITIES |
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Net Increase in Deposits |
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Net Increase in Federal Funds Purchased | | — | ||||
Principal Payments on Notes Payable |
| — | ( | |||
Preferred Stock Dividends Paid | ( | — | ||||
Stock Options Exercised | | | ||||
Stock Repurchases | ( | ( | ||||
Forfeiture of Restricted Stock Awards | ( | |||||
Shares Repurchased for Tax Withholdings Upon Vesting of Restricted Stock-Based Awards | ( | ( | ||||
Net Cash Provided by Financing Activities |
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NET CHANGE IN CASH AND CASH EQUIVALENTS |
| ( |
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Cash and Cash Equivalents Beginning |
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Cash and Cash Equivalents Ending | $ | | $ | | ||
SUPPLEMENTAL CASH FLOW DISCLOSURE |
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Cash Paid for Interest | $ | | $ | | ||
Cash Paid for Income Taxes |
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Net Investment Securities Purchased but Not Settled | | |
See accompanying notes to consolidated financial statements.
7
Bridgewater Bancshares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
Note 1: Description of the Business and Summary of Significant Accounting Policies
Organization
Bridgewater Bancshares, Inc. (the “Company”) is a financial holding company whose operations consist of the ownership of its wholly-owned subsidiaries, Bridgewater Bank (the “Bank”) and Bridgewater Risk Management, Inc. The Bank commenced operations in 2005 and provides retail and commercial loan and deposit services, principally to customers within the Minneapolis-St. Paul-Bloomington, MN-WI Metropolitan Statistical Area. In 2008, the Bank formed BWB Holdings, LLC, a wholly owned subsidiary of the Bank, for the purpose of holding repossessed property. In 2018, the Bank formed Bridgewater Investment Management, Inc., a wholly owned subsidiary of the Bank, for the purpose of holding certain municipal securities and to engage in municipal lending activities.
Bridgewater Risk Management, Inc. was incorporated in December 2016 as a wholly owned insurance company. It insures the Company and its subsidiaries against certain risks unique to the operations of the Company and for which insurance may not be currently available or economically feasible in today’s insurance marketplace. Bridgewater Risk Management pools resources with several other insurance company subsidiaries of financial institutions to spread a limited amount of risk among themselves.
Basis of Presentation
The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include all disclosures necessary for a complete presentation of the consolidated balance sheets, consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of shareholders’ equity and consolidated statements of cash flows in conformity with U.S. generally accepted accounting principles (“GAAP”). However, all normal recurring adjustments which are, in the opinion of management, necessary for the fair presentation of the interim financial statements have been included. The results of operations for the three-month period ended March 31, 2022 are not necessarily indicative of the results which may be expected for the entire year. For further information, refer to the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 8, 2022.
Principles of Consolidation
These consolidated financial statements include the amounts of the Company, the Bank, with locations in Bloomington, Greenwood, Minneapolis (2), St. Louis Park, Orono, and St. Paul, Minnesota, BWB Holdings, LLC, Bridgewater Investment Management, Inc., and Bridgewater Risk Management, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates in Preparation of Financial Statements
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Information available which could affect judgements includes, but is not limited to, changes in interest rates, changes in the performance of the economy, including COVID-19 pandemic related changes, and changes in the financial condition of borrowers.
8
Material estimates that are particularly susceptible to significant change in the near term include the determination of the allowance for loan losses, calculation of deferred tax assets, fair value of financial instruments, and investment securities impairment.
Emerging Growth Company
The Company qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and may take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. In addition, even if the Company complies with the greater obligations of public companies that are not emerging growth companies, the Company may avail itself of the reduced requirements applicable to emerging growth companies from time to time in the future, so long as the Company is an emerging growth company. The Company will continue to be an emerging growth company until the earliest to occur of: (1) the end of the fiscal year following the fifth anniversary of the date of the first sale of common equity securities under the Company’s Registration Statement on Form S-1, which was declared effective by the SEC on March 13, 2018; (2) the last day of the fiscal year in which the Company has $1.07 billion or more in annual revenues; (3) the date on which the Company is deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); or (4) the date on which the Company has, during the previous three-year period, issued publicly or privately, more than $1.0 billion in non-convertible debt securities.
Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933 for complying with new or revised accounting standards. As an emerging growth company, the Company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company elected to take advantage of the benefits of this extended transition period.
Impact of Recently Issued Accounting Guidance
In March 2022, the FASB issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. This ASU updates guidance in Topic 326 to eliminate the accounting guidance for TDRs by creditors in Subtopic 310-40, Receivables – Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancing and restructuring activities by creditors when a borrower is experiencing financial difficulty. Additionally, the amendments to ASC 326 require that an entity disclose current period gross write offs by year of origination within the vintage disclosures, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivables by year of origination. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022 for companies that have adopted CECL, including interim periods within those fiscal years, with early adoption permitted. The Company is in the process of evaluating the provisions of this ASU and its effects on the consolidated financial statements, however the adoption of this guidance is not expected to have a significant impact on the Company’s consolidated financial statements.
Subsequent Events
Subsequent events have been evaluated through May 5, 2022, which is the date the consolidated financial statements were available to be issued.
9
Note 2: Earnings Per Share
Basic earnings per common share are computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per common share are computed by dividing net income by the weighted average number of common shares adjusted for the dilutive effect of stock compensation. For the three months ended March 31, 2022 and 2021, respectively,
The following table presents the numerators and denominators for basic and diluted earnings per share computations for the three months ended March 31, 2022 and 2021:
Three Months Ended | ||||||
March 31, | ||||||
(dollars in thousands, except per share data) |
| 2022 |
| 2021 | ||
Net Income Available to Common Shareholders | $ | | $ | | ||
Weighted Average Common Stock Outstanding: | ||||||
Weighted Average Common Stock Outstanding (Basic) | | | ||||
Dilutive Effect of Stock Compensation | | | ||||
Weighted Average Common Stock Outstanding (Dilutive) | | | ||||
Basic Earnings per Common Share | $ | | $ | | ||
Diluted Earnings per Common Share | | |
Note 3: Securities
The following tables present the amortized cost and estimated fair value of securities with gross unrealized gains and losses at March 31, 2022 and December 31, 2021:
March 31, 2022 | ||||||||||||
Gross | Gross | |||||||||||
Amortized | Unrealized | Unrealized | ||||||||||
(dollars in thousands) |
| Cost |
| Gains |
| Losses |
| Fair Value | ||||
Securities Available for Sale: | ||||||||||||
U.S. Treasury Securities | $ | | $ | — | $ | ( | $ | | ||||
Municipal Bonds | | | ( | | ||||||||
Mortgage-Backed Securities |
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| ( |
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Corporate Securities |
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| ( |
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SBA Securities |
| | | ( | | |||||||
Asset-Backed Securities | | | ( | | ||||||||
Total Securities Available for Sale | $ | | $ | | $ | ( | $ | |
December 31, 2021 | ||||||||||||
Gross | Gross | |||||||||||
Amortized | Unrealized | Unrealized | ||||||||||
(dollars in thousands) |
| Cost |
| Gains |
| Losses |
| Fair Value | ||||
Securities Available for Sale: | ||||||||||||
U.S. Treasury Securities | $ | | $ | — | $ | ( | $ | | ||||
Municipal Bonds | |
| |
| ( | | ||||||
Mortgage-Backed Securities |
| |
| |
| ( |
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Corporate Securities |
| | | ( |
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SBA Securities |
| | | ( |
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Asset-Backed Securities | | | ( | | ||||||||
Total Securities Available for Sale | $ | | $ | | $ | ( | $ | |
10
The following tables present the fair value and gross unrealized losses of securities with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2022 and December 31, 2021:
Less Than 12 Months | 12 Months or Greater | Total | ||||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||
(dollars in thousands) |
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| Fair Value |
| Losses | ||||||
March 31, 2022 | ||||||||||||||||||
U.S. Treasury Securities | $ | | $ | ( | $ | — | $ | — | $ | | $ | ( | ||||||
Municipal Bonds | | ( | | ( | | ( | ||||||||||||
Mortgage-Backed Securities | | ( | | ( |
| |
| ( | ||||||||||
Corporate Securities | | ( | | ( |
| |
| ( | ||||||||||
SBA Securities | | ( | | ( |
| |
| ( | ||||||||||
Asset-Backed Securities | | ( | — | — | | ( | ||||||||||||
Total Securities Available for Sale | $ | | $ | ( | $ | | $ | ( | $ | | $ | ( |
Less Than 12 Months | 12 Months or Greater | Total | ||||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||
(dollars in thousands) |
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| Fair Value |
| Losses | ||||||
December 31, 2021 | ||||||||||||||||||
U.S. Treasury Securities | $ | | $ | ( | $ | — | $ | — | $ | | $ | ( | ||||||
Municipal Bonds | | ( | | ( | | ( | ||||||||||||
Mortgage-Backed Securities |
| | ( | | ( |
| |
| ( | |||||||||
Corporate Securities |
| | ( | | ( |
| |
| ( | |||||||||
SBA Securities |
| | ( | | ( |
| |
| ( | |||||||||
Asset-Backed Securities | | ( | — | — | | ( | ||||||||||||
Total Securities Available for Sale | $ | | $ | ( | $ | | $ | ( | $ | | $ | ( |
At March 31, 2022,
11
The following table presents a summary of amortized cost and estimated fair value of debt securities by the lesser of expected call date or contractual maturity as of March 31, 2022. Call date is used when a call of the debt security is expected, as determined by the Company when the security has a market value above its amortized cost. Contractual maturities will differ from expected maturities for mortgage-backed, SBA securities and asset-backed securities because borrowers may have the right to call or prepay obligations without penalties.