Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Bridgewater Bancshares, Inc. Announces Record Second Quarter 2021 Net Income of $11.0 Million, $0.38 Diluted Earnings Per Common Share By: Bridgewater Bancshares, Inc. via Business Wire July 29, 2021 at 07:05 AM EDT Bridgewater Bancshares, Inc. (Nasdaq: BWB) (the Company), the parent company of Bridgewater Bank (the Bank), today announced net income of $11.0 million for the second quarter of 2021, a 3.0% increase over net income of $10.7 million for the first quarter of 2021, and a 44.7% increase over net income of $7.6 million for the second quarter of 2020. Net income per diluted common share for the second quarter of 2021 was $0.38, a 2.4% increase compared to $0.37 per diluted common share for the first quarter of 2021, and a 44.9% increase, compared to $0.26 per diluted common share for the same period in 2020. “Bridgewater reported another quarter of record net income driven by robust organic loan growth, superb asset quality and a highly efficient business model,” said Chairman, Chief Executive Officer, and President, Jerry Baack. “Our unique ability to generate profitable loan growth in the current market has been the result of client acquisition opportunities from M&A-related market disruption, the expansion of our lending teams through opportunistic hires, and our strong brand and service model in the Twin Cities. This loan growth, along with a stabilizing core net interest margin, has led to continued revenue growth, all while maintaining consistently low levels of net charge-offs and nonperforming assets. With our proven growth engine and an efficiency ratio among the lowest in the industry, we believe we are well-positioned to continue gaining market share in the attractive Twin Cities market.” Second Quarter 2021 Financial Results Diluted Nonperforming Adjusted ROA PPNR ROA (1) ROE earnings per share assets to total assets efficiency ratio (1) 1.43% 2.07% 15.40% $ 0.38 0.02% 41.5% _________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. Second Quarter 2021 Highlights Diluted earnings per common share were $0.38 for the second quarter of 2021, compared to $0.37 per common share for the first quarter of 2021. Annualized return on average assets (ROA) and annualized return on average common equity (ROE) for the second quarter of 2021 were 1.43% and 15.40%, compared to ROA and ROE of 1.47% and 15.87%, respectively, for the first quarter of 2021. Pre-provision net revenue (PPNR), a non-GAAP financial measure, was $15.9 million for the second quarter of 2021, an increase of 1.6%, compared to $15.6 million from the first quarter of 2021. PPNR ROA, a non-GAAP financial measure, was 2.07% for the second quarter of 2021, compared to 2.15% for the first quarter of 2021. Gross loans increased $168.1 million in the second quarter of 2021, or 27.8% annualized, compared to the first quarter of 2021. Gross loans, excluding Paycheck Protection Program (PPP) loans, increased $232.2 million in the second quarter of 2021, or 41.2% annualized, compared to the first quarter of 2021. Deposits increased $82.3 million in the second quarter of 2021, or 12.5% annualized, compared to the first quarter of 2021. Net interest margin was 3.52% for the second quarter of 2021, compared to 3.60% in the first quarter of 2021. The adjusted efficiency ratio, a non-GAAP financial measure which excludes the impact of certain non-routine income and expenses from noninterest expense, was 41.5% for the second quarter of 2021, compared to 40.7% for the first quarter of 2021. A loan loss provision of $1.6 million was recorded in the second quarter of 2021 to support strong organic loan growth. The allowance for loan losses to total loans was 1.45% at June 30, 2021, compared to 1.48% at March 31, 2021. The allowance for loan losses to total loans, excluding PPP loans, was 1.50% at June 30, 2021, compared to 1.59% at March 31, 2021. Annualized net loan charge-offs (recoveries) as a percentage of average loans were 0.00% for the second quarter of 2021, compared to (0.01)% for the first quarter of 2021. Tangible book value per share, a non-GAAP financial measure, increased 4.3%, or $0.42, to $10.22 at June 30, 2021, compared to $9.80 at March 31, 2021. The Company purchased $25.0 million of bank owned life insurance policies on certain officers. Recent Developments On July 8, 2021, the Company announced the completion of a private placement of $30.0 million in aggregate principal amount of 3.25% fixed-to-floating rate subordinated notes due 2031. The Company intends to use the net proceeds of the private placement for general corporate purposes, including support for organic growth plans, support for bank level capital ratios and possible redemption or repurchase of currently outstanding indebtedness. Key Financial Measures As of and for the Three Months Ended As of and for the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020 Per Common Share Data Basic Earnings Per Share $ 0.39 $ 0.38 $ 0.26 $ 0.77 $ 0.52 Diluted Earnings Per Share 0.38 0.37 0.26 0.75 0.51 Book Value Per Share 10.33 9.92 8.92 10.33 8.92 Tangible Book Value Per Share (1) 10.22 9.80 8.80 10.22 8.80 Basic Weighted Average Shares Outstanding 28,040,762 28,017,366 28,676,441 28,029,129 28,733,968 Diluted Weighted Average Shares Outstanding 29,128,181 28,945,212 29,165,157 29,048,424 29,350,426 Shares Outstanding at Period End 28,162,777 28,132,929 28,837,560 28,162,777 28,837,560 Selected Performance Ratios Return on Average Assets (Annualized) 1.43 % 1.47 % 1.17 % 1.45 % 1.22 % Pre-Provision Net Revenue Return on Average Assets (Annualized) (1) 2.07 2.15 2.00 2.11 2.05 Return on Average Common Equity (Annualized) 15.40 15.87 11.98 15.63 11.96 Return on Average Tangible Common Equity (Annualized) (1) 15.58 16.06 12.14 15.81 12.12 Yield on Interest Earning Assets 4.17 4.31 4.45 4.24 4.66 Yield on Total Loans, Gross 4.56 4.74 4.85 4.64 5.00 Cost of Interest Bearing Liabilities 0.96 1.04 1.58 1.00 1.70 Cost of Total Deposits 0.54 0.59 0.99 0.56 1.12 Net Interest Margin (2) 3.52 3.60 3.38 3.56 3.48 Core Net Interest Margin (1)(2) 3.31 3.34 3.22 3.33 3.29 Efficiency Ratio (1) 42.0 41.2 48.6 41.6 46.5 Adjusted Efficiency Ratio (1) 41.5 40.7 40.4 41.1 42.2 Noninterest Expense to Average Assets (Annualized) 1.50 1.51 1.64 1.50 1.67 Adjusted Noninterest Expense to Average Assets (Annualized) (1) 1.48 1.49 1.37 1.48 1.51 Loan to Deposit Ratio 95.3 91.9 97.8 Core Deposits to Total Deposits(3) 81.2 83.5 75.7 Tangible Common Equity to Tangible Assets (1) 9.10 8.99 9.23 Capital Ratios (Bank Only) (4) Tier 1 Leverage Ratio 10.57 % 10.65 % 11.36 % Tier 1 Risk-based Capital Ratio 11.24 12.08 12.96 Total Risk-based Capital Ratio 12.49 13.33 14.21 Capital Ratios (Consolidated) (4) Tier 1 Leverage Ratio 9.08 % 9.11 % 9.94 % Tier 1 Risk-based Capital Ratio 9.67 10.34 11.39 Total Risk-based Capital Ratio 13.49 14.46 15.99 _________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. (2) Amounts calculated on a tax-equivalent basis using the statutory federal tax rate of 21%. (3) Core deposits are defined as total deposits less brokered deposits and certificates of deposit greater than $250,000. (4) Preliminary data. Current period subject to change prior to filings with applicable regulatory agencies. Selected Financial Data June 30, March 31, December 31, September 30, June 30, (dollars in thousands) 2021 2021 2020 2020 2020 Selected Balance Sheet Data Total Assets $ 3,162,612 $ 3,072,359 $ 2,927,345 $ 2,774,564 $ 2,754,463 Total Loans, Gross 2,594,186 2,426,123 2,326,428 2,259,228 2,193,778 Allowance for Loan Losses 37,591 35,987 34,841 31,381 27,633 Goodwill and Other Intangibles 3,200 3,248 3,296 3,344 3,391 Deposits 2,720,906 2,638,654 2,501,636 2,273,044 2,242,051 Tangible Common Equity (1) 287,630 275,923 262,109 262,088 253,799 Total Shareholders' Equity 290,830 279,171 265,405 265,432 257,190 Average Total Assets - Quarter-to-Date 3,076,712 2,940,262 2,816,032 2,711,755 2,622,272 Average Common Equity - Quarter-to-Date 286,311 272,729 265,716 263,195 255,109 _________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. For the Three Months Ended For the Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2021 2021 2020 2021 2020 Selected Income Statement Data Interest Income $ 31,147 $ 30,440 $ 28,166 $ 61,587 $ 55,634 Interest Expense 4,859 5,045 6,824 9,904 14,190 Net Interest Income 26,288 25,395 21,342 51,683 41,444 Provision for Loan Losses 1,600 1,100 3,000 2,700 5,100 Net Interest Income after Provision for Loan Losses 24,688 24,295 18,342 48,983 36,344 Noninterest Income 1,603 1,008 1,977 2,611 3,696 Noninterest Expense 11,477 10,923 10,711 22,400 20,457 Income Before Income Taxes 14,814 14,380 9,608 29,194 19,583 Provision for Income Taxes 3,821 3,709 2,010 7,530 4,542 Net Income $ 10,993 $ 10,671 $ 7,598 $ 21,664 $ 15,041 Income Statement Net Interest Income Net interest income was $26.3 million for the second quarter of 2021, an increase of $893,000, or 3.5%, from $25.4 million in the first quarter of 2021, and an increase of $4.9 million, or 23.2%, from $21.3 million in the second quarter of 2020. The linked-quarter and year-over-year increases in net interest income were primarily due to growth in average interest earning assets, lower rates paid on deposits, and the recognition of PPP loan origination fees, offset partially by declining yields on loans. Average interest earning assets were $3.02 billion for the second quarter of 2021, an increase of $136.4 million, or 4.7%, from $2.88 billion for the first quarter of 2021, and an increase of $452.1 million, or 17.6%, from $2.57 billion for the second quarter of 2020. The linked-quarter increase in average interest earning assets was primarily due to robust organic growth in the loan portfolio. The year-over-year increase in average interest earning assets was primarily due to strong organic growth in the loan portfolio, as well as continued purchases of investment securities. Net interest margin (on a fully tax-equivalent basis) for the second quarter of 2021 was 3.52%, an 8 basis point decline from 3.60% in the first quarter of 2021, and a 14 basis point increase from 3.38% in the second quarter of 2020. Core net interest margin (on a fully tax-equivalent basis), a non-GAAP financial measure which excludes the impact of loan fees and PPP balances, interest, and fees, for the second quarter of 2021 was 3.31%, a 3 basis point decline from 3.34% in the first quarter of 2021, and a 9 basis point increase from 3.22% in the second quarter of 2020. While the origination volume of PPP loans earning 1.00% negatively impacted net interest margin, the recognition of fees associated with the originations has benefited net interest margin for each of the past three quarters. The SBA began forgiving PPP loans, which has accelerated the recognition of PPP fees starting in the fourth quarter of 2020 and continuing into the second quarter of 2021. The Company recognized $1.4 million of PPP origination fees during the second quarter of 2021, compared to $1.5 million during the first quarter of 2021. The elevated fee recognition is illustrated in the 4.75% PPP loan yield for the second quarter of 2021. The following table summarizes PPP loan originations and net origination fees as of June 30, 2021: Originated Outstanding Program Lifetime Number Principal Number Principal Net Origination Net Origination (dollars in thousands) of Loans Balance of Loans Balance Fees Generated Fees Earned Round One PPP Loans 1,200 $ 181,600 225 $ 27,184 $ 5,706 $ 5,330 Round Two PPP Loans 651 78,386 606 71,888 3,544 498 Totals 1,851 $ 259,986 831 $ 99,072 $ 9,250 $ 5,828 Interest income was $31.1 million for the second quarter of 2021, an increase of $707,000, or 2.3%, from $30.4 million in the first quarter of 2021, and an increase of $3.0 million, or 10.6%, from $28.2 million in the second quarter of 2020. The yield on interest earning assets (on a fully tax-equivalent basis) was 4.17% in the second quarter of 2021, compared to 4.31% in the first quarter of 2021, and 4.45% in the second quarter of 2020. The linked-quarter decrease in the yield on interest earning assets was primarily due to the historically low interest rate environment resulting in a lower loan yield and lower loan fees recognized, offset partially by $1.4 million of PPP loan origination fees. The year-over-year decline in the yield on interest earning assets was primarily due to the historically low interest rate environment resulting in lower loan and security yields. Loan interest income and loan fees remain the primary contributing factors to the changes in yield on interest earning assets. The aggregate loan yield, excluding PPP loans, decreased to 4.54% in the second quarter of 2021, which was 18 basis points lower than 4.72% in the first quarter of 2021, and 47 basis points lower than 5.01% in the second quarter of 2020. While loan fees have maintained a relatively stable contribution to the aggregate loan yield, the historically low yield curve has resulted in a declining core yield on loans in comparison to both prior periods. A summary of interest and fees recognized on loans, excluding PPP loans, for the periods indicated is as follows: Three Months Ended June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 Interest 4.37 % 4.50 % 4.59 % 4.69 % 4.76 % Fees 0.17 0.22 0.28 0.24 0.25 Yield on Loans, Excluding PPP Loans 4.54 % 4.72 % 4.87 % 4.93 % 5.01 % Interest expense was $4.9 million for the second quarter of 2021, a decrease of $186,000, or 3.7%, from $5.0 million in the first quarter of 2021, and a decrease of $2.0 million, or 28.8%, from $6.8 million in the second quarter of 2020. The cost of interest bearing liabilities declined 8 basis points on a linked-quarter basis from 1.04% in the first quarter of 2021 to 0.96% in the second quarter of 2021, primarily due to lower rates paid on deposits. On a year-over-year basis, the cost of interest bearing liabilities decreased 62 basis points from 1.58% in the second quarter of 2020 to 0.96% in the second quarter of 2021, primarily due to lower rates paid on deposits, the payoff of the Company’s notes payable, and the early extinguishment of $94.0 million of longer term FHLB advances, offset partially by strong growth of interest bearing deposits and additional subordinated debentures. Interest expense on deposits was $3.5 million for the second quarter of 2021, a decrease of $159,000, or 4.3%, from $3.7 million in the first quarter of 2021, and a decrease of $1.7 million, or 32.1%, from $5.2 million in the second quarter of 2020. The cost of total deposits declined 5 basis points on a linked-quarter basis from 0.59% in the first quarter of 2021, and declined 45 basis points on a year-over-year basis from 0.99% in the second quarter of 2020, to 0.54% in the second quarter of 2021, primarily due to deposit rate cuts consistent with a lower rate environment and the downward repricing of time deposits. The Company anticipates more opportunities to lower the cost of total deposits due to continued deposit repricing as time deposits mature and the recent success of adding efficient, low-cost brokered deposits. A summary of the Company’s average balances, interest yields and rates, and net interest margin for the three months ended June 30, 2021, March 31, 2021, and June 30, 2020 is as follows: For the Three Months Ended June 30, 2021 March 31, 2021 June 30, 2020 Average Interest Yield/ Average Interest Yield/ Average Interest Yield/ Balance & Fees Rate Balance & Fees Rate Balance & Fees Rate (dollars in thousands) Interest Earning Assets: Cash Investments $ 88,067 $ 33 0.15 % $ 105,477 $ 34 0.13 % $ 109,073 $ 37 0.14 % Investment Securities: Taxable Investment Securities 314,049 1,647 2.10 301,680 1,723 2.32 203,559 1,304 2.58 Tax-Exempt Investment Securities (1) 77,029 842 4.38 80,963 881 4.41 91,793 996 4.37 Total Investment Securities 391,078 2,489 2.55 382,643 2,604 2.76 295,352 2,300 3.13 Paycheck Protection Program Loans (2) 149,312 1,767 4.75 148,881 1,864 5.08 139,235 873 2.52 Loans (1)(2) 2,384,759 27,011 4.54 2,241,038 26,074 4.72 2,013,163 25,070 5.01 Total Loans 2,534,071 28,778 4.56 2,389,919 27,938 4.74 2,152,398 25,943 4.85 Federal Home Loan Bank Stock 6,221 54 3.51 5,045 78 6.28 10,469 125 4.81 Total Interest Earning Assets 3,019,437 31,354 4.17 % 2,883,084 30,654 4.31 % 2,567,292 28,405 4.45 % Noninterest Earning Assets 57,275 57,178 54,980 Total Assets $ 3,076,712 $ 2,940,262 $ 2,622,272 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 421,132 $ 520 0.50 % $ 364,017 $ 422 0.47 % $ 272,565 $ 377 0.56 % Savings and Money Market Deposits 764,632 940 0.49 724,104 1,008 0.56 521,313 1,327 1.02 Time Deposits 332,346 1,075 1.30 344,715 1,267 1.49 388,357 2,122 2.20 Brokered Deposits 379,768 978 1.03 402,694 974 0.98 319,711 1,344 1.69 Total Interest Bearing Deposits 1,897,878 3,513 0.74 1,835,530 3,671 0.81 1,501,946 5,170 1.38 Federal Funds Purchased 9,932 6 0.24 — — — 9 — 0.72 Notes Payable — — — 6,722 61 3.66 12,000 111 3.72 FHLB Advances 57,500 228 1.59 57,500 228 1.61 193,819 1,064 2.21 Subordinated Debentures 73,862 1,112 6.04 73,776 1,085 5.96 31,228 479 6.17 Total Interest Bearing Liabilities 2,039,172 4,859 0.96 % 1,973,528 5,045 1.04 % 1,739,002 6,824 1.58 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 732,299 676,173 603,456 Other Noninterest Bearing Liabilities 18,930 17,832 24,705 Total Noninterest Bearing Liabilities 751,229 694,005 628,161 Shareholders' Equity 286,311 272,729 255,109 Total Liabilities and Shareholders' Equity $ 3,076,712 $ 2,940,262 $ 2,622,272 Net Interest Income / Interest Rate Spread 26,495 3.21 % 25,609 3.27 % 21,581 2.87 % Net Interest Margin (3) 3.52 % 3.60 % 3.38 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities and Loans (207 ) (214 ) (239 ) Net Interest Income $ 26,288 $ 25,395 $ 21,342 _________________________________ (1) Interest income and average rates for tax-exempt investment securities and loans are presented on a tax-equivalent basis, assuming a statutory federal income tax rate of 21%. (2) Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs. (3) Net interest margin includes the tax equivalent adjustment and represents the annualized results of: (i) the difference between interest income on interest earning assets and the interest expense on interest bearing liabilities, divided by (ii) average interest earning assets for the period. Provision for Loan Losses The provision for loan losses was $1.6 million for the second quarter of 2021, an increase of $500,000 from $1.1 million for the first quarter of 2021, and a decrease of $1.4 million from $3.0 million for the second quarter of 2020. The provision recorded in the second quarter of 2021 was primarily attributable to growth of the loan portfolio. The allowance for loan losses to total loans was 1.45% at June 30, 2021, compared to 1.48% at March 31, 2021, and 1.26% at June 30, 2020. The allowance for loan losses to total loans, excluding PPP loans, was 1.50% at June 30, 2021, compared to 1.59% at March 31, 2021, and 1.37% at June 30, 2020. As an emerging growth company, the Company is not subject to Accounting Standards Update No. 2016-13 “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments,“ or CECL, until January 1, 2023. The following table presents the activity in the Company’s allowance for loan losses for the periods indicated: Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2021 2021 2020 2021 2020 Balance at Beginning of Period $ 35,987 $ 34,841 $ 24,585 $ 34,841 $ 22,526 Provision for Loan Losses 1,600 1,100 3,000 2,700 5,100 Charge-offs (3 ) (14 ) (1 ) (17 ) (48 ) Recoveries 7 60 49 67 55 Balance at End of Period $ 37,591 $ 35,987 $ 27,633 $ 37,591 $ 27,633 Noninterest Income Noninterest income was $1.6 million for the second quarter of 2021, an increase of $595,000 from $1.0 million for the first quarter of 2021, and a decrease of $374,000 from $2.0 million for the second quarter of 2020. The linked-quarter increase was primarily due to increased gains on sales of securities, offset partially by a decrease in letter of credit fees. The year-over-year decrease was primarily due to lower gains on sales of securities, offset partially by increased customer service fees and other income. The following table presents the major components of noninterest income for the periods indicated: Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2021 2021 2020 2021 2020 Noninterest Income: Customer Service Fees $ 231 $ 234 $ 135 $ 465 $ 375 Net Gain on Sales of Securities 702 — 1,361 702 1,364 Letter of Credit Fees 231 327 265 558 539 Debit Card Interchange Fees 141 130 99 271 191 Swap Fees — — — — 907 Other Income 298 317 117 615 320 Totals $ 1,603 $ 1,008 $ 1,977 $ 2,611 $ 3,696 Noninterest Expense Noninterest expense was $11.5 million for the second quarter of 2021, an increase of $554,000 from $10.9 million for the first quarter of 2021, and an increase of $766,000 from $10.7 million for the second quarter of 2020. The linked-quarter increase was primarily due to an increase in salaries and employee benefits and technology expenses. The year-over-year increase was primarily attributable to increased salaries and employee benefits, occupancy and equipment, technology, and marketing and advertising expenses, offset partially by a $1.4 million decrease in FHLB advance prepayment fees incurred in the second quarter of 2020, as well as lower amortization of tax credit investments. The following table presents the major components of noninterest expense for the periods indicated: Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2021 2021 2020 2021 2020 Noninterest Expense: Salaries and Employee Benefits $ 7,512 $ 7,102 $ 6,348 $ 14,614 $ 12,802 Occupancy and Equipment 980 1,055 672 2,035 1,385 FDIC Insurance Assessment 290 315 168 605 358 Data Processing 300 291 238 591 467 Professional and Consulting Fees 552 544 423 1,096 908 Information Technology and Telecommunications 549 462 326 1,011 592 Marketing and Advertising 314 286 85 600 551 Intangible Asset Amortization 47 48 47 95 95 Amortization of Tax Credit Investments 140 118 362 258 447 FHLB Advance Prepayment Fees — — 1,430 — 1,430 Other Expense 793 702 612 1,495 1,422 Totals $ 11,477 $ 10,923 $ 10,711 $ 22,400 $ 20,457 In the second quarter of 2021, the Company attracted 18 new hires in lending, deposit gathering, technology, risk management, and other supportive roles, which continued to demonstrate the Company’s status as a preferred employer amidst ongoing market disruption. The Company reached 214 full-time equivalent employees at June 30, 2021, compared to 200 employees at March 31, 2021, and 173 employees at June 30, 2020. The efficiency ratio, a non-GAAP financial measure, was 42.0% for the second quarter of 2021, compared to 41.2% for the first quarter of 2021, and 48.6% for the second quarter of 2020. Excluding the impact of certain non-routine income and expenses, the adjusted efficiency ratio, a non-GAAP financial measure, was 41.5% for the second quarter of 2021, 40.7% for the first quarter of 2021 and 40.4% for the second quarter of 2020. The efficiencies of the Company’s “branch-light” model have positioned the Company well for when the pandemic ends, and going forward, providing more flexibility for the Company to make significant investments in technology as the industry adapts to evolving client behavior. Income Taxes The effective combined federal and state income tax rate for the first and second quarters of 2021 was 25.8%, an increase from 20.9% for the second quarter of 2020. Balance Sheet Total assets at June 30, 2021 were $3.16 billion, a 2.9% increase from $3.07 billion at March 31, 2021, and a 14.8% increase from $2.75 billion at June 30, 2020. The linked-quarter increase in total assets was primarily due to robust organic loan growth, offset partially by a corresponding decrease in cash and cash equivalents. The year-over-year increase in total assets was primarily due to robust organic loan growth, as well as deploying excess liquidity into investment securities. Total gross loans at June 30, 2021 were $2.59 billion, an increase of $168.1 million, or 6.9%, over total gross loans of $2.43 billion at March 31, 2021, and an increase of $400.4 million, or 18.3%, over total gross loans of $2.19 billion at June 30, 2020. The increase in the loan portfolio during the second quarter of 2021 was primarily due to growth in the multifamily and construction and land development segments, offset partially by declining PPP loan balances. When excluding the PPP loans altogether, gross loans grew $232.2 million during the second quarter of 2021, or 41.2% on an annualized basis. The Company's continued strong loan growth has been driven by M&A-related market disruption in the Twin Cities resulting in client and banker acquisition opportunities, PPP-related client acquisition opportunities, the expansion of the talented lending teams, and the strong and growing brand in the Twin Cities market. The following table presents the dollar composition of the Company’s loan portfolio, by category, at the dates indicated: June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 (dollars in thousands) Commercial $ 321,474 $ 301,023 $ 304,220 $ 287,254 $ 302,536 Paycheck Protection Program 99,072 163,258 138,454 181,596 180,228 Construction and Land Development 251,573 193,372 170,217 175,882 191,768 Real Estate Mortgage: 1 - 4 Family Mortgage 277,943 294,964 294,479 286,089 289,456 Multifamily 790,275 665,415 626,465 585,814 522,491 CRE Owner Occupied 87,507 79,665 75,604 75,963 73,539 CRE Nonowner Occupied 758,101 720,396 709,300 660,058 627,651 Total Real Estate Mortgage Loans 1,913,826 1,760,440 1,705,848 1,607,924 1,513,137 Consumer and Other 8,241 8,030 7,689 6,572 6,109 Total Loans, Gross 2,594,186 2,426,123 2,326,428 2,259,228 2,193,778 Allowance for Loan Losses (37,591 ) (35,987 ) (34,841 ) (31,381 ) (27,633 ) Net Deferred Loan Fees (11,450 ) (11,273 ) (9,151 ) (10,367 ) (10,287 ) Total Loans, Net $ 2,545,145 $ 2,378,863 $ 2,282,436 $ 2,217,480 $ 2,155,858 Total deposits at June 30, 2021 were $2.72 billion, an increase of $82.3 million, or 3.1%, over total deposits of $2.64 billion at March 31, 2021, and an increase of $478.9 million, or 21.4%, over total deposits of $2.24 billion at June 30, 2020. Deposit growth in the second quarter of 2021 was primarily due to an increase in noninterest bearing transaction deposits and brokered deposits, offset partially by a decline in savings and money market deposits and time deposits. Similar to the loan portfolio, the growth in core deposits has been a result of successful new client and banker acquisition initiatives and the strong, growing brand in the Twin Cities market. Brokered deposits increased back to levels last seen in the fourth quarter of 2020 due to the opportunity to obtain $75.0 million in funding at 1 basis point at various short-term maturities ranging from 3-12 months. As illustrated, the brokered deposit market provides flexibility in structure, optionality and efficiency not provided in traditional, retail deposit channels. Given the fluid environment, management believes deposits could experience fluctuations in future periods. The following table presents the dollar composition of the Company’s deposit portfolio, by category, at the dates indicated: June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 (dollars in thousands) Noninterest Bearing Transaction Deposits $ 758,023 $ 712,999 $ 671,903 $ 685,773 $ 648,869 Interest Bearing Transaction Deposits 432,123 433,344 366,290 322,253 285,386 Savings and Money Market Deposits 761,485 791,583 657,617 498,397 516,543 Time Deposits 321,857 344,581 353,543 363,897 382,187 Brokered Deposits 447,418 356,147 452,283 402,724 409,066 Total Deposits $ 2,720,906 $ 2,638,654 $ 2,501,636 $ 2,273,044 $ 2,242,051 Total shareholders’ equity at June 30, 2021 was $290.8 million, an increase of $11.7 million, or 4.2%, over total shareholders’ equity of $279.2 million at March 31, 2021, and an increase of $33.6 million, or 13.1%, over total shareholders’ equity of $257.2 million at June 30, 2020. The linked-quarter increase was due to net income retained. The year-over-year increase was due to net income retained and an increase in unrealized gains in the securities and derivatives portfolios, offset partially by stock repurchases made under the Company’s stock repurchase program. The Company did not repurchase any shares of its common stock during the second quarter of 2021. Tangible book value per share, a non-GAAP financial measure, was $10.22 as of June 30, 2021, an increase of 4.3% from $9.80 as of March 31, 2021, and an increase of 16.2% from $8.80 as of June 30, 2020. Subsequent to the end of the quarter, on July 8, 2021 the Company issued $30.0 million of 3.25% Fixed-to-Floating Rate Subordinated Notes due 2031 in a private placement transaction. These notes are callable starting on July 15, 2026 and qualify for tier 2 capital treatment at the holding company level. The Company intends to use the net proceeds of the private placement for general corporate purposes, including support for organic growth plans, support for bank level capital ratios and possible redemption or repurchase of currently outstanding indebtedness. Asset Quality Annualized net charge-offs (recoveries) as a percent of average loans for the second quarter of 2021 were 0.00%, compared to (0.01)% for the first quarter of 2021, and (0.01)% for the second quarter of 2020. At June 30, 2021, the Company’s nonperforming assets, which include nonaccrual loans, loans past due 90 days and still accruing, and foreclosed assets, were $761,000, or 0.02% of total assets, as compared to $770,000, or 0.03% of total assets at March 31, 2021, and $602,000 or 0.02% of total assets at June 30, 2020. The Company has increased oversight and analysis of all segments of the loan portfolio in response to the COVID-19 pandemic, especially in vulnerable industries such as hospitality and restaurants, to proactively monitor evolving credit risk. Loans that have potential weaknesses that warrant a watchlist risk rating at June 30, 2021 totaled $56.7 million, compared to $58.3 million at March 31, 2021. As the COVID-19 pandemic continues to evolve, the length and extent of the economic uncertainty may result in further watchlist or adverse classifications in the loan portfolio. Loans that warranted a substandard risk rating at June 30, 2021 totaled $7.2 million, compared to $6.7 million at March 31, 2021. The following table presents a summary of asset quality measurements at the dates indicated: As of and for the Three Months Ended June 30, March 31 December 31, September 30, June 30, (dollars in thousands) 2021 2021 2020 2020 2020 Selected Asset Quality Data Loans 30-89 Days Past Due $ — $ — $ 13 $ 458 $ 153 Loans 30-89 Days Past Due to Total Loans 0.00 % 0.00 % 0.00 % 0.02 % 0.01 % Nonperforming Loans $ 761 $ 770 $ 775 $ 433 $ 602 Nonperforming Loans to Total Loans 0.03 % 0.03 % 0.03 % 0.02 % 0.03 % Foreclosed Assets $ — $ — $ — $ — $ — Nonaccrual Loans to Total Loans 0.03 % 0.03 % 0.03 % 0.02 % 0.03 % Nonaccrual Loans and Loans Past Due 90 Days and Still Accruing to Total Loans 0.03 0.03 0.03 0.02 0.03 Nonperforming Assets (1) $ 761 $ 770 $ 775 $ 433 $ 602 Nonperforming Assets to Total Assets (1) 0.02 % 0.03 % 0.03 % 0.02 % 0.02 % Allowance for Loan Losses to Total Loans 1.45 1.48 1.50 1.39 1.26 Allowance for Loan Losses to Total Loans, Excluding PPP Loans 1.51 1.59 1.59 1.51 1.37 Allowance for Loans Losses to Nonperforming Loans 4,939.68 4,673.64 4,495.61 7,247.34 4,590.20 Net Loan Charge-Offs (Recoveries) (Annualized) to Average Loans 0.00 (0.01 ) 0.08 0.00 (0.01 ) _________________________________ (1) Nonperforming assets are defined as nonaccrual loans plus loans 90 days past due plus foreclosed assets. The Company developed programs for clients who experienced business and personal disruptions due to the COVID-19 pandemic by providing interest-only modifications, loan payment deferrals, and extended amortization modifications. In accordance with interagency regulatory guidance and the CARES Act, qualifying loans modified in response to the COVID-19 pandemic are not considered troubled debt restructurings. The Company had 19 modified loans totaling $33.9 million outstanding as of June 30, 2021, representing 1.4% of the total loan portfolio, excluding PPP loans. The following table presents a rollforward of loan modification activity, by modification type, from March 31, 2021 to June 30, 2021: (dollars in thousands) Interest-Only Payment Deferral Extended Amortization Total Principal Balance - March 31, 2021 $ 31,663 $ 618 $ 4,802 $ 37,083 Modification Expired (4,139 ) (618 ) — (4,757 ) Additional Modification Granted 1,173 — — 1,173 New Modifications 468 — — 468 Net Principal Advances (Payments) (6 ) — (24 ) (30 ) Principal Balance - June 30, 2021 $ 29,159 $ — $ 4,778 $ 33,937 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 high-net-worth individuals. By pairing a range of deposit, lending and business services solutions with a responsive service model, Bridgewater has seen continuous growth and profitability. With total assets of $3.2 billion and seven branches as of June 30, 2021, 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: the negative effects of the COVID-19 pandemic, including its effects on the economic environment, our clients and our operations, as well as any changes to federal, state or local government laws, regulations or orders in connection with the pandemic; 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; new or revised accounting standards, including as a result of the future implementation of the Current Expected Credit Loss standard; the concentration of large loans to certain borrowers; the concentration of large deposits from certain clients; 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; developments and uncertainty related to the future use and availability of some reference rates, such as the London Interbank Offered Rate, as well as other alternative reference rates; 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; severe weather, natural disasters, wide spread disease or pandemics (including the COVID-19 pandemic), acts of war or terrorism or other adverse external events; potential impairment to the goodwill we recorded in connection with our past acquisition; changes to U.S. tax laws, regulations and guidance; 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. 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. Bridgewater Bancshares, Inc. and Subsidiaries Consolidated Balance Sheets (dollars in thousands, except share data) June 30, December 31, June 30, 2021 2020 2020 (Unaudited) (Unaudited) ASSETS Cash and Cash Equivalents $ 92,197 $ 160,675 $ 178,428 Bank-Owned Certificates of Deposit 2,368 2,860 2,895 Securities Available for Sale, at Fair Value 402,786 390,629 326,295 Loans, Net of Allowance for Loan Losses of $37,591 at June 30, 2021 (unaudited), $34,841 at December 31, 2020 and $27,633 at June 30, 2020 (unaudited) 2,545,145 2,282,436 2,155,858 Federal Home Loan Bank (FHLB) Stock, at Cost 5,832 5,027 8,617 Premises and Equipment, Net 50,177 50,987 43,062 Accrued Interest 8,728 9,172 8,267 Goodwill 2,626 2,626 2,626 Other Intangible Assets, Net 574 670 765 Other Assets 52,179 22,263 27,650 Total Assets $ 3,162,612 $ 2,927,345 $ 2,754,463 LIABILITIES AND EQUITY LIABILITIES Deposits: Noninterest Bearing $ 758,023 $ 671,903 $ 648,869 Interest Bearing 1,962,883 1,829,733 1,593,182 Total Deposits 2,720,906 2,501,636 2,242,051 Notes Payable — 11,000 12,000 FHLB Advances 57,500 57,500 147,500 Subordinated Debentures, Net of Issuance Costs 73,913 73,739 73,658 Accrued Interest Payable 2,654 1,615 1,953 Other Liabilities 16,809 16,450 20,111 Total Liabilities 2,871,782 2,661,940 2,497,273 SHAREHOLDERS' EQUITY Preferred Stock- $0.01 par value Authorized 10,000,000; None Issued and Outstanding at June 30, 2021 (unaudited), December 31, 2020 and June 30, 2020 (unaudited) — — — Common Stock- $0.01 par value Common Stock - Authorized 75,000,000; Issued and Outstanding 28,162,777 at June 30, 2021 (unaudited), 28,143,493 at December 31, 2020 and 28,837,560 at June 30, 2020 (unaudited) 282 281 288 Additional Paid-In Capital 104,811 103,714 110,906 Retained Earnings 176,495 154,831 142,678 Accumulated Other Comprehensive Income 9,242 6,579 3,318 Total Shareholders' Equity 290,830 265,405 257,190 Total Liabilities and Equity $ 3,162,612 $ 2,927,345 $ 2,754,463 Bridgewater Bancshares, Inc. and Subsidiaries Consolidated Statements of Income (dollars in thousands, except per share data) Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) INTEREST INCOME Loans, Including Fees $ 28,748 $ 27,908 $ 25,913 $ 56,656 $ 51,026 Investment Securities 2,312 2,420 2,091 4,732 4,287 Other 87 112 162 199 321 Total Interest Income 31,147 30,440 28,166 61,587 55,634 INTEREST EXPENSE Deposits 3,513 3,671 5,170 7,184 10,894 Notes Payable — 61 111 61 226 FHLB Advances 228 228 1,064 456 2,091 Subordinated Debentures 1,112 1,085 479 2,197 872 Federal Funds Purchased 6 — — 6 107 Total Interest Expense 4,859 5,045 6,824 9,904 14,190 NET INTEREST INCOME 26,288 25,395 21,342 51,683 41,444 Provision for Loan Losses 1,600 1,100 3,000 2,700 5,100 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 24,688 24,295 18,342 48,983 36,344 NONINTEREST INCOME Customer Service Fees 231 234 135 465 375 Net Gain on Sales of Available for Sale Securities 702 — 1,361 702 1,364 Other Income 670 774 481 1,444 1,957 Total Noninterest Income 1,603 1,008 1,977 2,611 3,696 NONINTEREST EXPENSE Salaries and Employee Benefits 7,512 7,102 6,348 14,614 12,802 Occupancy and Equipment 980 1,055 672 2,035 1,385 Other Expense 2,985 2,766 3,691 5,751 6,270 Total Noninterest Expense 11,477 10,923 10,711 22,400 20,457 INCOME BEFORE INCOME TAXES 14,814 14,380 9,608 29,194 19,583 Provision for Income Taxes 3,821 3,709 2,010 7,530 4,542 NET INCOME $ 10,993 $ 10,671 $ 7,598 $ 21,664 $ 15,041 EARNINGS PER SHARE Basic $ 0.39 $ 0.38 $ 0.26 $ 0.77 $ 0.52 Diluted 0.38 0.37 0.26 0.75 0.51 Dividends Paid Per Share — — — — — Bridgewater Bancshares, Inc. and Subsidiaries Analysis of Average Balances, Yields and Rates (year-to-date) (dollars in thousands, except per share data) (Unaudited) For the Six Months Ended June 30, 2021 June 30, 2020 Average Interest Yield/ Average Interest Yield/ Balance & Fees Rate Balance & Fees Rate (dollars in thousands) Interest Earning Assets: Cash Investments $ 96,724 $ 67 0.14 % $ 69,267 $ 96 0.28 % Investment Securities: Taxable Investment Securities 307,898 3,371 2.21 195,873 2,691 2.76 Tax-Exempt Investment Securities (1) 78,985 1,723 4.40 93,260 2,020 4.36 Total Investment Securities 386,883 5,094 2.66 289,133 4,711 3.28 Paycheck Protection Program Loans (2) 149,098 3,631 4.91 70,037 873 2.51 Loans (1)(2) 2,313,295 53,085 4.63 1,983,641 50,220 5.09 Total Loans 2,462,393 56,716 4.64 2,053,678 51,093 5.00 Federal Home Loan Bank Stock 5,636 132 4.74 10,370 225 4.37 Total Interest Earning Assets 2,951,636 62,009 4.24 % 2,422,448 56,125 4.66 % Noninterest Earning Assets 57,228 47,208 Total Assets $ 3,008,864 $ 2,469,656 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 392,732 $ 942 0.48 % $ 259,704 $ 808 0.63 % Savings and Money Market Deposits 744,480 1,949 0.53 527,445 3,232 1.23 Time Deposits 338,497 2,341 1.39 382,256 4,299 2.26 Brokered Deposits 391,167 1,952 1.01 269,000 2,555 1.91 Total Interest Bearing Deposits 1,866,876 7,184 0.78 1,438,405 10,894 1.52 Federal Funds Purchased 4,993 6 0.24 12,422 107 1.74 Notes Payable 3,343 61 3.66 12,253 226 3.71 FHLB Advances 57,500 456 1.60 183,099 2,091 2.30 Subordinated Debentures 73,819 2,197 6.00 27,986 872 6.27 Total Interest Bearing Liabilities 2,006,531 9,904 1.00 % 1,674,165 14,190 1.70 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 704,391 523,828 Other Noninterest Bearing Liabilities 18,384 18,708 Total Noninterest Bearing Liabilities 722,775 542,536 Shareholders' Equity 279,558 252,955 Total Liabilities and Shareholders' Equity $ 3,008,864 $ 2,469,656 Net Interest Income / Interest Rate Spread 52,105 3.24 % 41,935 2.96 % Net Interest Margin (3) 3.56 % 3.48 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities and Loans (422 ) (491 ) Net Interest Income $ 51,683 $ 41,444 _________________________________ (1) Interest income and average rates for tax-exempt investment securities and loans are presented on a tax-equivalent basis, assuming a statutory federal income tax rate of 21% (2) Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs. (3) Net interest margin includes the tax equivalent adjustment and represents the annualized results of: (i) the difference between interest income on interest earning assets and the interest expense on interest bearing liabilities, divided by (ii) average interest earning assets for the period. Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended For the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020 Pre-Provision Net Revenue Noninterest Income $ 1,603 $ 1,008 $ 1,977 $ 2,611 $ 3,696 Less: Gain on sales of Securities (702 ) — (1,361 ) (702 ) (1,364 ) Total Operating Noninterest Income 901 1,008 616 1,909 2,332 Plus: Net Interest income 26,288 25,395 21,342 51,683 41,444 Net Operating Revenue $ 27,189 $ 26,403 $ 21,958 $ 53,592 $ 43,776 Noninterest Expense $ 11,477 $ 10,923 $ 10,711 $ 22,400 $ 20,457 Less: Amortization of Tax Credit Investments (140 ) (118 ) (362 ) (258 ) (447 ) Less: FHLB Advance Prepayment Fees — — (1,430 ) — (1,430 ) Total Operating Noninterest Expense $ 11,337 $ 10,805 $ 8,919 $ 22,142 $ 18,580 Pre-Provision Net Revenue $ 15,852 $ 15,598 $ 13,039 $ 31,450 $ 25,196 Plus: Non-Operating Revenue Adjustments 702 — 1,361 702 1,364 Less: Provision for Loan Losses 1,600 1,100 3,000 2,700 5,100 Non-Operating Expense Adjustments 140 118 1,792 258 1,877 Provision for Income Taxes 3,821 3,709 2,010 7,530 4,542 Net Income $ 10,993 $ 10,671 $ 7,598 $ 21,664 $ 15,041 Average Assets $ 3,076,712 $ 2,940,262 $ 2,622,272 $ 3,008,864 $ 2,469,656 Pre-Provision Net Revenue Return on Average Assets 2.07 % 2.15 % 2.00 % 2.11 % 2.05 % As of and for the Three Months Ended As of and for the Six Months Ended June 30, March 31 June 30, June 30, June 30, 2021 2021 2020 2021 2020 Core Net Interest Margin Net Interest Income (Tax-Equivalent Basis) $ 26,495 $ 25,609 $ 21,581 $ 52,105 $ 41,935 Less: Loan Fees (1,023 ) (1,202 ) (1,264 ) (2,225 ) (2,571 ) Less: PPP Interest and Fees (1,767 ) (1,864 ) (873 ) (3,631 ) (873 ) Core Net Interest Income $ 23,705 $ 22,543 $ 19,444 $ 46,249 $ 38,491 Average Interest Earning Assets 3,019,437 2,883,084 2,567,292 2,951,636 2,422,448 Less: Average PPP Loans (149,312 ) (148,881 ) (139,235 ) (149,098 ) (70,037 ) Core Average Interest Earning Assets $ 2,870,125 $ 2,734,203 $ 2,428,057 $ 2,802,538 $ 2,352,411 Core Net Interest Margin 3.31 % 3.34 % 3.22 % 3.33 % 3.29 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended For the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020 Efficiency Ratio Noninterest Expense $ 11,477 $ 10,923 $ 10,711 $ 22,400 $ 20,457 Less: Amortization of Intangible Assets (47 ) (48 ) (47 ) (95 ) (95 ) Adjusted Noninterest Expense $ 11,430 $ 10,875 $ 10,664 $ 22,305 $ 20,362 Net Interest Income 26,288 25,395 21,342 51,683 41,444 Noninterest Income 1,603 1,008 1,977 2,611 3,696 Less: Gain on Sales of Securities (702 ) — (1,361 ) (702 ) (1,364 ) Adjusted Operating Revenue $ 27,189 $ 26,403 $ 21,958 $ 53,592 $ 43,776 Efficiency Ratio 42.0 % 41.2 % 48.6 % 41.6 % 46.5 % Adjusted Efficiency Ratio Noninterest Expense $ 11,477 $ 10,923 $ 10,711 $ 22,400 $ 20,457 Less: Amortization of Tax Credit Investments (140 ) (118 ) (362 ) (258 ) (447 ) Less: FHLB Advance Prepayment Fees — — (1,430 ) — (1,430 ) Less: Amortization of Intangible Assets (47 ) (48 ) (47 ) (95 ) (95 ) Adjusted Noninterest Expense $ 11,290 $ 10,757 $ 8,872 $ 22,047 $ 18,485 Net Interest Income 26,288 25,395 21,342 51,683 41,444 Noninterest Income 1,603 1,008 1,977 2,611 3,696 Less: Gain on Sales of Securities (702 ) — (1,361 ) (702 ) (1,364 ) Adjusted Operating Revenue $ 27,189 $ 26,403 $ 21,958 $ 53,592 $ 43,776 Adjusted Efficiency Ratio 41.5 % 40.7 % 40.4 % 41.1 % 42.2 % For the Three Months Ended For the Six Months Ended June 30, March 31 June 30, June 30, June 30, 2021 2021 2020 2021 2020 Adjusted Noninterest Expense to Average Assets Noninterest Expense $ 11,477 $ 10,923 $ 10,711 $ 22,400 $ 20,457 Less: Amortization of Tax Credit Investments (140 ) (118 ) (362 ) (258 ) (447 ) Less: FHLB Advance Prepayment Fees — — (1,430 ) — (1,430 ) Adjusted Noninterest Expense $ 11,337 $ 10,805 $ 8,919 $ 22,142 $ 18,580 Average Assets $ 3,076,712 $ 2,940,262 $ 2,622,272 $ 3,008,864 $ 2,469,656 Adjusted Noninterest Expense to Average Assets 1.48 % 1.49 % 1.37 % 1.48 % 1.51 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) As of and for the Three Months Ended As of and for the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020 Tangible Common Equity and Tangible Common Equity/Tangible Assets Common Equity $ 290,830 $ 279,171 $ 257,190 Less: Intangible Assets (3,200 ) (3,248 ) (3,391 ) Tangible Common Equity $ 287,630 $ 275,923 $ 253,799 Total Assets $ 3,162,612 $ 3,072,359 $ 2,754,463 Less: Intangible Assets (3,200 ) (3,248 ) (3,391 ) Tangible Assets $ 3,159,412 $ 3,069,111 $ 2,751,072 Tangible Common Equity/Tangible Assets 9.10 % 8.99 % 9.23 % Tangible Book Value Per Share Book Value Per Common Share $ 10.33 $ 9.92 $ 8.92 Less: Effects of Intangible Assets (0.11 ) (0.12 ) (0.12 ) Tangible Book Value Per Common Share $ 10.22 $ 9.80 $ 8.80 Return on Average Tangible Common Equity Net Income $ 10,993 $ 10,671 $ 7,598 $ 21,664 $ 15,041 Average Common Equity $ 286,311 $ 272,729 $ 255,109 $ 279,558 $ 252,955 Less: Effects of Average Intangible Assets (3,228 ) (3,276 ) (3,419 ) (3,251 ) (3,442 ) Average Tangible Common Equity $ 283,083 $ 269,453 $ 251,690 $ 276,307 $ 249,513 Return on Average Tangible Common Equity 15.58 % 16.06 % 12.14 % 15.81 % 12.12 % Three Months Ended June 30, March 31, December 31, September 30, June 30, 2021 2021 2020 2020 2020 Tangible Common Equity Common Equity $ 290,830 $ 279,171 $ 265,405 $ 265,432 $ 257,190 Less: Intangible Assets (3,200 ) (3,248 ) (3,296 ) (3,344 ) (3,391 ) Tangible Common Equity $ 287,630 $ 275,923 $ 262,109 $ 262,088 $ 253,799 View source version on businesswire.com: https://www.businesswire.com/news/home/20210729005241/en/Contacts Justin Horstman Director of Investor Relations investorrelations@bwbmn.com 952-542-5169 Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
Bridgewater Bancshares, Inc. Announces Record Second Quarter 2021 Net Income of $11.0 Million, $0.38 Diluted Earnings Per Common Share By: Bridgewater Bancshares, Inc. via Business Wire July 29, 2021 at 07:05 AM EDT Bridgewater Bancshares, Inc. (Nasdaq: BWB) (the Company), the parent company of Bridgewater Bank (the Bank), today announced net income of $11.0 million for the second quarter of 2021, a 3.0% increase over net income of $10.7 million for the first quarter of 2021, and a 44.7% increase over net income of $7.6 million for the second quarter of 2020. Net income per diluted common share for the second quarter of 2021 was $0.38, a 2.4% increase compared to $0.37 per diluted common share for the first quarter of 2021, and a 44.9% increase, compared to $0.26 per diluted common share for the same period in 2020. “Bridgewater reported another quarter of record net income driven by robust organic loan growth, superb asset quality and a highly efficient business model,” said Chairman, Chief Executive Officer, and President, Jerry Baack. “Our unique ability to generate profitable loan growth in the current market has been the result of client acquisition opportunities from M&A-related market disruption, the expansion of our lending teams through opportunistic hires, and our strong brand and service model in the Twin Cities. This loan growth, along with a stabilizing core net interest margin, has led to continued revenue growth, all while maintaining consistently low levels of net charge-offs and nonperforming assets. With our proven growth engine and an efficiency ratio among the lowest in the industry, we believe we are well-positioned to continue gaining market share in the attractive Twin Cities market.” Second Quarter 2021 Financial Results Diluted Nonperforming Adjusted ROA PPNR ROA (1) ROE earnings per share assets to total assets efficiency ratio (1) 1.43% 2.07% 15.40% $ 0.38 0.02% 41.5% _________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. Second Quarter 2021 Highlights Diluted earnings per common share were $0.38 for the second quarter of 2021, compared to $0.37 per common share for the first quarter of 2021. Annualized return on average assets (ROA) and annualized return on average common equity (ROE) for the second quarter of 2021 were 1.43% and 15.40%, compared to ROA and ROE of 1.47% and 15.87%, respectively, for the first quarter of 2021. Pre-provision net revenue (PPNR), a non-GAAP financial measure, was $15.9 million for the second quarter of 2021, an increase of 1.6%, compared to $15.6 million from the first quarter of 2021. PPNR ROA, a non-GAAP financial measure, was 2.07% for the second quarter of 2021, compared to 2.15% for the first quarter of 2021. Gross loans increased $168.1 million in the second quarter of 2021, or 27.8% annualized, compared to the first quarter of 2021. Gross loans, excluding Paycheck Protection Program (PPP) loans, increased $232.2 million in the second quarter of 2021, or 41.2% annualized, compared to the first quarter of 2021. Deposits increased $82.3 million in the second quarter of 2021, or 12.5% annualized, compared to the first quarter of 2021. Net interest margin was 3.52% for the second quarter of 2021, compared to 3.60% in the first quarter of 2021. The adjusted efficiency ratio, a non-GAAP financial measure which excludes the impact of certain non-routine income and expenses from noninterest expense, was 41.5% for the second quarter of 2021, compared to 40.7% for the first quarter of 2021. A loan loss provision of $1.6 million was recorded in the second quarter of 2021 to support strong organic loan growth. The allowance for loan losses to total loans was 1.45% at June 30, 2021, compared to 1.48% at March 31, 2021. The allowance for loan losses to total loans, excluding PPP loans, was 1.50% at June 30, 2021, compared to 1.59% at March 31, 2021. Annualized net loan charge-offs (recoveries) as a percentage of average loans were 0.00% for the second quarter of 2021, compared to (0.01)% for the first quarter of 2021. Tangible book value per share, a non-GAAP financial measure, increased 4.3%, or $0.42, to $10.22 at June 30, 2021, compared to $9.80 at March 31, 2021. The Company purchased $25.0 million of bank owned life insurance policies on certain officers. Recent Developments On July 8, 2021, the Company announced the completion of a private placement of $30.0 million in aggregate principal amount of 3.25% fixed-to-floating rate subordinated notes due 2031. The Company intends to use the net proceeds of the private placement for general corporate purposes, including support for organic growth plans, support for bank level capital ratios and possible redemption or repurchase of currently outstanding indebtedness. Key Financial Measures As of and for the Three Months Ended As of and for the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020 Per Common Share Data Basic Earnings Per Share $ 0.39 $ 0.38 $ 0.26 $ 0.77 $ 0.52 Diluted Earnings Per Share 0.38 0.37 0.26 0.75 0.51 Book Value Per Share 10.33 9.92 8.92 10.33 8.92 Tangible Book Value Per Share (1) 10.22 9.80 8.80 10.22 8.80 Basic Weighted Average Shares Outstanding 28,040,762 28,017,366 28,676,441 28,029,129 28,733,968 Diluted Weighted Average Shares Outstanding 29,128,181 28,945,212 29,165,157 29,048,424 29,350,426 Shares Outstanding at Period End 28,162,777 28,132,929 28,837,560 28,162,777 28,837,560 Selected Performance Ratios Return on Average Assets (Annualized) 1.43 % 1.47 % 1.17 % 1.45 % 1.22 % Pre-Provision Net Revenue Return on Average Assets (Annualized) (1) 2.07 2.15 2.00 2.11 2.05 Return on Average Common Equity (Annualized) 15.40 15.87 11.98 15.63 11.96 Return on Average Tangible Common Equity (Annualized) (1) 15.58 16.06 12.14 15.81 12.12 Yield on Interest Earning Assets 4.17 4.31 4.45 4.24 4.66 Yield on Total Loans, Gross 4.56 4.74 4.85 4.64 5.00 Cost of Interest Bearing Liabilities 0.96 1.04 1.58 1.00 1.70 Cost of Total Deposits 0.54 0.59 0.99 0.56 1.12 Net Interest Margin (2) 3.52 3.60 3.38 3.56 3.48 Core Net Interest Margin (1)(2) 3.31 3.34 3.22 3.33 3.29 Efficiency Ratio (1) 42.0 41.2 48.6 41.6 46.5 Adjusted Efficiency Ratio (1) 41.5 40.7 40.4 41.1 42.2 Noninterest Expense to Average Assets (Annualized) 1.50 1.51 1.64 1.50 1.67 Adjusted Noninterest Expense to Average Assets (Annualized) (1) 1.48 1.49 1.37 1.48 1.51 Loan to Deposit Ratio 95.3 91.9 97.8 Core Deposits to Total Deposits(3) 81.2 83.5 75.7 Tangible Common Equity to Tangible Assets (1) 9.10 8.99 9.23 Capital Ratios (Bank Only) (4) Tier 1 Leverage Ratio 10.57 % 10.65 % 11.36 % Tier 1 Risk-based Capital Ratio 11.24 12.08 12.96 Total Risk-based Capital Ratio 12.49 13.33 14.21 Capital Ratios (Consolidated) (4) Tier 1 Leverage Ratio 9.08 % 9.11 % 9.94 % Tier 1 Risk-based Capital Ratio 9.67 10.34 11.39 Total Risk-based Capital Ratio 13.49 14.46 15.99 _________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. (2) Amounts calculated on a tax-equivalent basis using the statutory federal tax rate of 21%. (3) Core deposits are defined as total deposits less brokered deposits and certificates of deposit greater than $250,000. (4) Preliminary data. Current period subject to change prior to filings with applicable regulatory agencies. Selected Financial Data June 30, March 31, December 31, September 30, June 30, (dollars in thousands) 2021 2021 2020 2020 2020 Selected Balance Sheet Data Total Assets $ 3,162,612 $ 3,072,359 $ 2,927,345 $ 2,774,564 $ 2,754,463 Total Loans, Gross 2,594,186 2,426,123 2,326,428 2,259,228 2,193,778 Allowance for Loan Losses 37,591 35,987 34,841 31,381 27,633 Goodwill and Other Intangibles 3,200 3,248 3,296 3,344 3,391 Deposits 2,720,906 2,638,654 2,501,636 2,273,044 2,242,051 Tangible Common Equity (1) 287,630 275,923 262,109 262,088 253,799 Total Shareholders' Equity 290,830 279,171 265,405 265,432 257,190 Average Total Assets - Quarter-to-Date 3,076,712 2,940,262 2,816,032 2,711,755 2,622,272 Average Common Equity - Quarter-to-Date 286,311 272,729 265,716 263,195 255,109 _________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. For the Three Months Ended For the Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2021 2021 2020 2021 2020 Selected Income Statement Data Interest Income $ 31,147 $ 30,440 $ 28,166 $ 61,587 $ 55,634 Interest Expense 4,859 5,045 6,824 9,904 14,190 Net Interest Income 26,288 25,395 21,342 51,683 41,444 Provision for Loan Losses 1,600 1,100 3,000 2,700 5,100 Net Interest Income after Provision for Loan Losses 24,688 24,295 18,342 48,983 36,344 Noninterest Income 1,603 1,008 1,977 2,611 3,696 Noninterest Expense 11,477 10,923 10,711 22,400 20,457 Income Before Income Taxes 14,814 14,380 9,608 29,194 19,583 Provision for Income Taxes 3,821 3,709 2,010 7,530 4,542 Net Income $ 10,993 $ 10,671 $ 7,598 $ 21,664 $ 15,041 Income Statement Net Interest Income Net interest income was $26.3 million for the second quarter of 2021, an increase of $893,000, or 3.5%, from $25.4 million in the first quarter of 2021, and an increase of $4.9 million, or 23.2%, from $21.3 million in the second quarter of 2020. The linked-quarter and year-over-year increases in net interest income were primarily due to growth in average interest earning assets, lower rates paid on deposits, and the recognition of PPP loan origination fees, offset partially by declining yields on loans. Average interest earning assets were $3.02 billion for the second quarter of 2021, an increase of $136.4 million, or 4.7%, from $2.88 billion for the first quarter of 2021, and an increase of $452.1 million, or 17.6%, from $2.57 billion for the second quarter of 2020. The linked-quarter increase in average interest earning assets was primarily due to robust organic growth in the loan portfolio. The year-over-year increase in average interest earning assets was primarily due to strong organic growth in the loan portfolio, as well as continued purchases of investment securities. Net interest margin (on a fully tax-equivalent basis) for the second quarter of 2021 was 3.52%, an 8 basis point decline from 3.60% in the first quarter of 2021, and a 14 basis point increase from 3.38% in the second quarter of 2020. Core net interest margin (on a fully tax-equivalent basis), a non-GAAP financial measure which excludes the impact of loan fees and PPP balances, interest, and fees, for the second quarter of 2021 was 3.31%, a 3 basis point decline from 3.34% in the first quarter of 2021, and a 9 basis point increase from 3.22% in the second quarter of 2020. While the origination volume of PPP loans earning 1.00% negatively impacted net interest margin, the recognition of fees associated with the originations has benefited net interest margin for each of the past three quarters. The SBA began forgiving PPP loans, which has accelerated the recognition of PPP fees starting in the fourth quarter of 2020 and continuing into the second quarter of 2021. The Company recognized $1.4 million of PPP origination fees during the second quarter of 2021, compared to $1.5 million during the first quarter of 2021. The elevated fee recognition is illustrated in the 4.75% PPP loan yield for the second quarter of 2021. The following table summarizes PPP loan originations and net origination fees as of June 30, 2021: Originated Outstanding Program Lifetime Number Principal Number Principal Net Origination Net Origination (dollars in thousands) of Loans Balance of Loans Balance Fees Generated Fees Earned Round One PPP Loans 1,200 $ 181,600 225 $ 27,184 $ 5,706 $ 5,330 Round Two PPP Loans 651 78,386 606 71,888 3,544 498 Totals 1,851 $ 259,986 831 $ 99,072 $ 9,250 $ 5,828 Interest income was $31.1 million for the second quarter of 2021, an increase of $707,000, or 2.3%, from $30.4 million in the first quarter of 2021, and an increase of $3.0 million, or 10.6%, from $28.2 million in the second quarter of 2020. The yield on interest earning assets (on a fully tax-equivalent basis) was 4.17% in the second quarter of 2021, compared to 4.31% in the first quarter of 2021, and 4.45% in the second quarter of 2020. The linked-quarter decrease in the yield on interest earning assets was primarily due to the historically low interest rate environment resulting in a lower loan yield and lower loan fees recognized, offset partially by $1.4 million of PPP loan origination fees. The year-over-year decline in the yield on interest earning assets was primarily due to the historically low interest rate environment resulting in lower loan and security yields. Loan interest income and loan fees remain the primary contributing factors to the changes in yield on interest earning assets. The aggregate loan yield, excluding PPP loans, decreased to 4.54% in the second quarter of 2021, which was 18 basis points lower than 4.72% in the first quarter of 2021, and 47 basis points lower than 5.01% in the second quarter of 2020. While loan fees have maintained a relatively stable contribution to the aggregate loan yield, the historically low yield curve has resulted in a declining core yield on loans in comparison to both prior periods. A summary of interest and fees recognized on loans, excluding PPP loans, for the periods indicated is as follows: Three Months Ended June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 Interest 4.37 % 4.50 % 4.59 % 4.69 % 4.76 % Fees 0.17 0.22 0.28 0.24 0.25 Yield on Loans, Excluding PPP Loans 4.54 % 4.72 % 4.87 % 4.93 % 5.01 % Interest expense was $4.9 million for the second quarter of 2021, a decrease of $186,000, or 3.7%, from $5.0 million in the first quarter of 2021, and a decrease of $2.0 million, or 28.8%, from $6.8 million in the second quarter of 2020. The cost of interest bearing liabilities declined 8 basis points on a linked-quarter basis from 1.04% in the first quarter of 2021 to 0.96% in the second quarter of 2021, primarily due to lower rates paid on deposits. On a year-over-year basis, the cost of interest bearing liabilities decreased 62 basis points from 1.58% in the second quarter of 2020 to 0.96% in the second quarter of 2021, primarily due to lower rates paid on deposits, the payoff of the Company’s notes payable, and the early extinguishment of $94.0 million of longer term FHLB advances, offset partially by strong growth of interest bearing deposits and additional subordinated debentures. Interest expense on deposits was $3.5 million for the second quarter of 2021, a decrease of $159,000, or 4.3%, from $3.7 million in the first quarter of 2021, and a decrease of $1.7 million, or 32.1%, from $5.2 million in the second quarter of 2020. The cost of total deposits declined 5 basis points on a linked-quarter basis from 0.59% in the first quarter of 2021, and declined 45 basis points on a year-over-year basis from 0.99% in the second quarter of 2020, to 0.54% in the second quarter of 2021, primarily due to deposit rate cuts consistent with a lower rate environment and the downward repricing of time deposits. The Company anticipates more opportunities to lower the cost of total deposits due to continued deposit repricing as time deposits mature and the recent success of adding efficient, low-cost brokered deposits. A summary of the Company’s average balances, interest yields and rates, and net interest margin for the three months ended June 30, 2021, March 31, 2021, and June 30, 2020 is as follows: For the Three Months Ended June 30, 2021 March 31, 2021 June 30, 2020 Average Interest Yield/ Average Interest Yield/ Average Interest Yield/ Balance & Fees Rate Balance & Fees Rate Balance & Fees Rate (dollars in thousands) Interest Earning Assets: Cash Investments $ 88,067 $ 33 0.15 % $ 105,477 $ 34 0.13 % $ 109,073 $ 37 0.14 % Investment Securities: Taxable Investment Securities 314,049 1,647 2.10 301,680 1,723 2.32 203,559 1,304 2.58 Tax-Exempt Investment Securities (1) 77,029 842 4.38 80,963 881 4.41 91,793 996 4.37 Total Investment Securities 391,078 2,489 2.55 382,643 2,604 2.76 295,352 2,300 3.13 Paycheck Protection Program Loans (2) 149,312 1,767 4.75 148,881 1,864 5.08 139,235 873 2.52 Loans (1)(2) 2,384,759 27,011 4.54 2,241,038 26,074 4.72 2,013,163 25,070 5.01 Total Loans 2,534,071 28,778 4.56 2,389,919 27,938 4.74 2,152,398 25,943 4.85 Federal Home Loan Bank Stock 6,221 54 3.51 5,045 78 6.28 10,469 125 4.81 Total Interest Earning Assets 3,019,437 31,354 4.17 % 2,883,084 30,654 4.31 % 2,567,292 28,405 4.45 % Noninterest Earning Assets 57,275 57,178 54,980 Total Assets $ 3,076,712 $ 2,940,262 $ 2,622,272 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 421,132 $ 520 0.50 % $ 364,017 $ 422 0.47 % $ 272,565 $ 377 0.56 % Savings and Money Market Deposits 764,632 940 0.49 724,104 1,008 0.56 521,313 1,327 1.02 Time Deposits 332,346 1,075 1.30 344,715 1,267 1.49 388,357 2,122 2.20 Brokered Deposits 379,768 978 1.03 402,694 974 0.98 319,711 1,344 1.69 Total Interest Bearing Deposits 1,897,878 3,513 0.74 1,835,530 3,671 0.81 1,501,946 5,170 1.38 Federal Funds Purchased 9,932 6 0.24 — — — 9 — 0.72 Notes Payable — — — 6,722 61 3.66 12,000 111 3.72 FHLB Advances 57,500 228 1.59 57,500 228 1.61 193,819 1,064 2.21 Subordinated Debentures 73,862 1,112 6.04 73,776 1,085 5.96 31,228 479 6.17 Total Interest Bearing Liabilities 2,039,172 4,859 0.96 % 1,973,528 5,045 1.04 % 1,739,002 6,824 1.58 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 732,299 676,173 603,456 Other Noninterest Bearing Liabilities 18,930 17,832 24,705 Total Noninterest Bearing Liabilities 751,229 694,005 628,161 Shareholders' Equity 286,311 272,729 255,109 Total Liabilities and Shareholders' Equity $ 3,076,712 $ 2,940,262 $ 2,622,272 Net Interest Income / Interest Rate Spread 26,495 3.21 % 25,609 3.27 % 21,581 2.87 % Net Interest Margin (3) 3.52 % 3.60 % 3.38 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities and Loans (207 ) (214 ) (239 ) Net Interest Income $ 26,288 $ 25,395 $ 21,342 _________________________________ (1) Interest income and average rates for tax-exempt investment securities and loans are presented on a tax-equivalent basis, assuming a statutory federal income tax rate of 21%. (2) Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs. (3) Net interest margin includes the tax equivalent adjustment and represents the annualized results of: (i) the difference between interest income on interest earning assets and the interest expense on interest bearing liabilities, divided by (ii) average interest earning assets for the period. Provision for Loan Losses The provision for loan losses was $1.6 million for the second quarter of 2021, an increase of $500,000 from $1.1 million for the first quarter of 2021, and a decrease of $1.4 million from $3.0 million for the second quarter of 2020. The provision recorded in the second quarter of 2021 was primarily attributable to growth of the loan portfolio. The allowance for loan losses to total loans was 1.45% at June 30, 2021, compared to 1.48% at March 31, 2021, and 1.26% at June 30, 2020. The allowance for loan losses to total loans, excluding PPP loans, was 1.50% at June 30, 2021, compared to 1.59% at March 31, 2021, and 1.37% at June 30, 2020. As an emerging growth company, the Company is not subject to Accounting Standards Update No. 2016-13 “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments,“ or CECL, until January 1, 2023. The following table presents the activity in the Company’s allowance for loan losses for the periods indicated: Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2021 2021 2020 2021 2020 Balance at Beginning of Period $ 35,987 $ 34,841 $ 24,585 $ 34,841 $ 22,526 Provision for Loan Losses 1,600 1,100 3,000 2,700 5,100 Charge-offs (3 ) (14 ) (1 ) (17 ) (48 ) Recoveries 7 60 49 67 55 Balance at End of Period $ 37,591 $ 35,987 $ 27,633 $ 37,591 $ 27,633 Noninterest Income Noninterest income was $1.6 million for the second quarter of 2021, an increase of $595,000 from $1.0 million for the first quarter of 2021, and a decrease of $374,000 from $2.0 million for the second quarter of 2020. The linked-quarter increase was primarily due to increased gains on sales of securities, offset partially by a decrease in letter of credit fees. The year-over-year decrease was primarily due to lower gains on sales of securities, offset partially by increased customer service fees and other income. The following table presents the major components of noninterest income for the periods indicated: Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2021 2021 2020 2021 2020 Noninterest Income: Customer Service Fees $ 231 $ 234 $ 135 $ 465 $ 375 Net Gain on Sales of Securities 702 — 1,361 702 1,364 Letter of Credit Fees 231 327 265 558 539 Debit Card Interchange Fees 141 130 99 271 191 Swap Fees — — — — 907 Other Income 298 317 117 615 320 Totals $ 1,603 $ 1,008 $ 1,977 $ 2,611 $ 3,696 Noninterest Expense Noninterest expense was $11.5 million for the second quarter of 2021, an increase of $554,000 from $10.9 million for the first quarter of 2021, and an increase of $766,000 from $10.7 million for the second quarter of 2020. The linked-quarter increase was primarily due to an increase in salaries and employee benefits and technology expenses. The year-over-year increase was primarily attributable to increased salaries and employee benefits, occupancy and equipment, technology, and marketing and advertising expenses, offset partially by a $1.4 million decrease in FHLB advance prepayment fees incurred in the second quarter of 2020, as well as lower amortization of tax credit investments. The following table presents the major components of noninterest expense for the periods indicated: Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2021 2021 2020 2021 2020 Noninterest Expense: Salaries and Employee Benefits $ 7,512 $ 7,102 $ 6,348 $ 14,614 $ 12,802 Occupancy and Equipment 980 1,055 672 2,035 1,385 FDIC Insurance Assessment 290 315 168 605 358 Data Processing 300 291 238 591 467 Professional and Consulting Fees 552 544 423 1,096 908 Information Technology and Telecommunications 549 462 326 1,011 592 Marketing and Advertising 314 286 85 600 551 Intangible Asset Amortization 47 48 47 95 95 Amortization of Tax Credit Investments 140 118 362 258 447 FHLB Advance Prepayment Fees — — 1,430 — 1,430 Other Expense 793 702 612 1,495 1,422 Totals $ 11,477 $ 10,923 $ 10,711 $ 22,400 $ 20,457 In the second quarter of 2021, the Company attracted 18 new hires in lending, deposit gathering, technology, risk management, and other supportive roles, which continued to demonstrate the Company’s status as a preferred employer amidst ongoing market disruption. The Company reached 214 full-time equivalent employees at June 30, 2021, compared to 200 employees at March 31, 2021, and 173 employees at June 30, 2020. The efficiency ratio, a non-GAAP financial measure, was 42.0% for the second quarter of 2021, compared to 41.2% for the first quarter of 2021, and 48.6% for the second quarter of 2020. Excluding the impact of certain non-routine income and expenses, the adjusted efficiency ratio, a non-GAAP financial measure, was 41.5% for the second quarter of 2021, 40.7% for the first quarter of 2021 and 40.4% for the second quarter of 2020. The efficiencies of the Company’s “branch-light” model have positioned the Company well for when the pandemic ends, and going forward, providing more flexibility for the Company to make significant investments in technology as the industry adapts to evolving client behavior. Income Taxes The effective combined federal and state income tax rate for the first and second quarters of 2021 was 25.8%, an increase from 20.9% for the second quarter of 2020. Balance Sheet Total assets at June 30, 2021 were $3.16 billion, a 2.9% increase from $3.07 billion at March 31, 2021, and a 14.8% increase from $2.75 billion at June 30, 2020. The linked-quarter increase in total assets was primarily due to robust organic loan growth, offset partially by a corresponding decrease in cash and cash equivalents. The year-over-year increase in total assets was primarily due to robust organic loan growth, as well as deploying excess liquidity into investment securities. Total gross loans at June 30, 2021 were $2.59 billion, an increase of $168.1 million, or 6.9%, over total gross loans of $2.43 billion at March 31, 2021, and an increase of $400.4 million, or 18.3%, over total gross loans of $2.19 billion at June 30, 2020. The increase in the loan portfolio during the second quarter of 2021 was primarily due to growth in the multifamily and construction and land development segments, offset partially by declining PPP loan balances. When excluding the PPP loans altogether, gross loans grew $232.2 million during the second quarter of 2021, or 41.2% on an annualized basis. The Company's continued strong loan growth has been driven by M&A-related market disruption in the Twin Cities resulting in client and banker acquisition opportunities, PPP-related client acquisition opportunities, the expansion of the talented lending teams, and the strong and growing brand in the Twin Cities market. The following table presents the dollar composition of the Company’s loan portfolio, by category, at the dates indicated: June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 (dollars in thousands) Commercial $ 321,474 $ 301,023 $ 304,220 $ 287,254 $ 302,536 Paycheck Protection Program 99,072 163,258 138,454 181,596 180,228 Construction and Land Development 251,573 193,372 170,217 175,882 191,768 Real Estate Mortgage: 1 - 4 Family Mortgage 277,943 294,964 294,479 286,089 289,456 Multifamily 790,275 665,415 626,465 585,814 522,491 CRE Owner Occupied 87,507 79,665 75,604 75,963 73,539 CRE Nonowner Occupied 758,101 720,396 709,300 660,058 627,651 Total Real Estate Mortgage Loans 1,913,826 1,760,440 1,705,848 1,607,924 1,513,137 Consumer and Other 8,241 8,030 7,689 6,572 6,109 Total Loans, Gross 2,594,186 2,426,123 2,326,428 2,259,228 2,193,778 Allowance for Loan Losses (37,591 ) (35,987 ) (34,841 ) (31,381 ) (27,633 ) Net Deferred Loan Fees (11,450 ) (11,273 ) (9,151 ) (10,367 ) (10,287 ) Total Loans, Net $ 2,545,145 $ 2,378,863 $ 2,282,436 $ 2,217,480 $ 2,155,858 Total deposits at June 30, 2021 were $2.72 billion, an increase of $82.3 million, or 3.1%, over total deposits of $2.64 billion at March 31, 2021, and an increase of $478.9 million, or 21.4%, over total deposits of $2.24 billion at June 30, 2020. Deposit growth in the second quarter of 2021 was primarily due to an increase in noninterest bearing transaction deposits and brokered deposits, offset partially by a decline in savings and money market deposits and time deposits. Similar to the loan portfolio, the growth in core deposits has been a result of successful new client and banker acquisition initiatives and the strong, growing brand in the Twin Cities market. Brokered deposits increased back to levels last seen in the fourth quarter of 2020 due to the opportunity to obtain $75.0 million in funding at 1 basis point at various short-term maturities ranging from 3-12 months. As illustrated, the brokered deposit market provides flexibility in structure, optionality and efficiency not provided in traditional, retail deposit channels. Given the fluid environment, management believes deposits could experience fluctuations in future periods. The following table presents the dollar composition of the Company’s deposit portfolio, by category, at the dates indicated: June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 (dollars in thousands) Noninterest Bearing Transaction Deposits $ 758,023 $ 712,999 $ 671,903 $ 685,773 $ 648,869 Interest Bearing Transaction Deposits 432,123 433,344 366,290 322,253 285,386 Savings and Money Market Deposits 761,485 791,583 657,617 498,397 516,543 Time Deposits 321,857 344,581 353,543 363,897 382,187 Brokered Deposits 447,418 356,147 452,283 402,724 409,066 Total Deposits $ 2,720,906 $ 2,638,654 $ 2,501,636 $ 2,273,044 $ 2,242,051 Total shareholders’ equity at June 30, 2021 was $290.8 million, an increase of $11.7 million, or 4.2%, over total shareholders’ equity of $279.2 million at March 31, 2021, and an increase of $33.6 million, or 13.1%, over total shareholders’ equity of $257.2 million at June 30, 2020. The linked-quarter increase was due to net income retained. The year-over-year increase was due to net income retained and an increase in unrealized gains in the securities and derivatives portfolios, offset partially by stock repurchases made under the Company’s stock repurchase program. The Company did not repurchase any shares of its common stock during the second quarter of 2021. Tangible book value per share, a non-GAAP financial measure, was $10.22 as of June 30, 2021, an increase of 4.3% from $9.80 as of March 31, 2021, and an increase of 16.2% from $8.80 as of June 30, 2020. Subsequent to the end of the quarter, on July 8, 2021 the Company issued $30.0 million of 3.25% Fixed-to-Floating Rate Subordinated Notes due 2031 in a private placement transaction. These notes are callable starting on July 15, 2026 and qualify for tier 2 capital treatment at the holding company level. The Company intends to use the net proceeds of the private placement for general corporate purposes, including support for organic growth plans, support for bank level capital ratios and possible redemption or repurchase of currently outstanding indebtedness. Asset Quality Annualized net charge-offs (recoveries) as a percent of average loans for the second quarter of 2021 were 0.00%, compared to (0.01)% for the first quarter of 2021, and (0.01)% for the second quarter of 2020. At June 30, 2021, the Company’s nonperforming assets, which include nonaccrual loans, loans past due 90 days and still accruing, and foreclosed assets, were $761,000, or 0.02% of total assets, as compared to $770,000, or 0.03% of total assets at March 31, 2021, and $602,000 or 0.02% of total assets at June 30, 2020. The Company has increased oversight and analysis of all segments of the loan portfolio in response to the COVID-19 pandemic, especially in vulnerable industries such as hospitality and restaurants, to proactively monitor evolving credit risk. Loans that have potential weaknesses that warrant a watchlist risk rating at June 30, 2021 totaled $56.7 million, compared to $58.3 million at March 31, 2021. As the COVID-19 pandemic continues to evolve, the length and extent of the economic uncertainty may result in further watchlist or adverse classifications in the loan portfolio. Loans that warranted a substandard risk rating at June 30, 2021 totaled $7.2 million, compared to $6.7 million at March 31, 2021. The following table presents a summary of asset quality measurements at the dates indicated: As of and for the Three Months Ended June 30, March 31 December 31, September 30, June 30, (dollars in thousands) 2021 2021 2020 2020 2020 Selected Asset Quality Data Loans 30-89 Days Past Due $ — $ — $ 13 $ 458 $ 153 Loans 30-89 Days Past Due to Total Loans 0.00 % 0.00 % 0.00 % 0.02 % 0.01 % Nonperforming Loans $ 761 $ 770 $ 775 $ 433 $ 602 Nonperforming Loans to Total Loans 0.03 % 0.03 % 0.03 % 0.02 % 0.03 % Foreclosed Assets $ — $ — $ — $ — $ — Nonaccrual Loans to Total Loans 0.03 % 0.03 % 0.03 % 0.02 % 0.03 % Nonaccrual Loans and Loans Past Due 90 Days and Still Accruing to Total Loans 0.03 0.03 0.03 0.02 0.03 Nonperforming Assets (1) $ 761 $ 770 $ 775 $ 433 $ 602 Nonperforming Assets to Total Assets (1) 0.02 % 0.03 % 0.03 % 0.02 % 0.02 % Allowance for Loan Losses to Total Loans 1.45 1.48 1.50 1.39 1.26 Allowance for Loan Losses to Total Loans, Excluding PPP Loans 1.51 1.59 1.59 1.51 1.37 Allowance for Loans Losses to Nonperforming Loans 4,939.68 4,673.64 4,495.61 7,247.34 4,590.20 Net Loan Charge-Offs (Recoveries) (Annualized) to Average Loans 0.00 (0.01 ) 0.08 0.00 (0.01 ) _________________________________ (1) Nonperforming assets are defined as nonaccrual loans plus loans 90 days past due plus foreclosed assets. The Company developed programs for clients who experienced business and personal disruptions due to the COVID-19 pandemic by providing interest-only modifications, loan payment deferrals, and extended amortization modifications. In accordance with interagency regulatory guidance and the CARES Act, qualifying loans modified in response to the COVID-19 pandemic are not considered troubled debt restructurings. The Company had 19 modified loans totaling $33.9 million outstanding as of June 30, 2021, representing 1.4% of the total loan portfolio, excluding PPP loans. The following table presents a rollforward of loan modification activity, by modification type, from March 31, 2021 to June 30, 2021: (dollars in thousands) Interest-Only Payment Deferral Extended Amortization Total Principal Balance - March 31, 2021 $ 31,663 $ 618 $ 4,802 $ 37,083 Modification Expired (4,139 ) (618 ) — (4,757 ) Additional Modification Granted 1,173 — — 1,173 New Modifications 468 — — 468 Net Principal Advances (Payments) (6 ) — (24 ) (30 ) Principal Balance - June 30, 2021 $ 29,159 $ — $ 4,778 $ 33,937 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 high-net-worth individuals. By pairing a range of deposit, lending and business services solutions with a responsive service model, Bridgewater has seen continuous growth and profitability. With total assets of $3.2 billion and seven branches as of June 30, 2021, 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: the negative effects of the COVID-19 pandemic, including its effects on the economic environment, our clients and our operations, as well as any changes to federal, state or local government laws, regulations or orders in connection with the pandemic; 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; new or revised accounting standards, including as a result of the future implementation of the Current Expected Credit Loss standard; the concentration of large loans to certain borrowers; the concentration of large deposits from certain clients; 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; developments and uncertainty related to the future use and availability of some reference rates, such as the London Interbank Offered Rate, as well as other alternative reference rates; 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; severe weather, natural disasters, wide spread disease or pandemics (including the COVID-19 pandemic), acts of war or terrorism or other adverse external events; potential impairment to the goodwill we recorded in connection with our past acquisition; changes to U.S. tax laws, regulations and guidance; 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. 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. Bridgewater Bancshares, Inc. and Subsidiaries Consolidated Balance Sheets (dollars in thousands, except share data) June 30, December 31, June 30, 2021 2020 2020 (Unaudited) (Unaudited) ASSETS Cash and Cash Equivalents $ 92,197 $ 160,675 $ 178,428 Bank-Owned Certificates of Deposit 2,368 2,860 2,895 Securities Available for Sale, at Fair Value 402,786 390,629 326,295 Loans, Net of Allowance for Loan Losses of $37,591 at June 30, 2021 (unaudited), $34,841 at December 31, 2020 and $27,633 at June 30, 2020 (unaudited) 2,545,145 2,282,436 2,155,858 Federal Home Loan Bank (FHLB) Stock, at Cost 5,832 5,027 8,617 Premises and Equipment, Net 50,177 50,987 43,062 Accrued Interest 8,728 9,172 8,267 Goodwill 2,626 2,626 2,626 Other Intangible Assets, Net 574 670 765 Other Assets 52,179 22,263 27,650 Total Assets $ 3,162,612 $ 2,927,345 $ 2,754,463 LIABILITIES AND EQUITY LIABILITIES Deposits: Noninterest Bearing $ 758,023 $ 671,903 $ 648,869 Interest Bearing 1,962,883 1,829,733 1,593,182 Total Deposits 2,720,906 2,501,636 2,242,051 Notes Payable — 11,000 12,000 FHLB Advances 57,500 57,500 147,500 Subordinated Debentures, Net of Issuance Costs 73,913 73,739 73,658 Accrued Interest Payable 2,654 1,615 1,953 Other Liabilities 16,809 16,450 20,111 Total Liabilities 2,871,782 2,661,940 2,497,273 SHAREHOLDERS' EQUITY Preferred Stock- $0.01 par value Authorized 10,000,000; None Issued and Outstanding at June 30, 2021 (unaudited), December 31, 2020 and June 30, 2020 (unaudited) — — — Common Stock- $0.01 par value Common Stock - Authorized 75,000,000; Issued and Outstanding 28,162,777 at June 30, 2021 (unaudited), 28,143,493 at December 31, 2020 and 28,837,560 at June 30, 2020 (unaudited) 282 281 288 Additional Paid-In Capital 104,811 103,714 110,906 Retained Earnings 176,495 154,831 142,678 Accumulated Other Comprehensive Income 9,242 6,579 3,318 Total Shareholders' Equity 290,830 265,405 257,190 Total Liabilities and Equity $ 3,162,612 $ 2,927,345 $ 2,754,463 Bridgewater Bancshares, Inc. and Subsidiaries Consolidated Statements of Income (dollars in thousands, except per share data) Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) INTEREST INCOME Loans, Including Fees $ 28,748 $ 27,908 $ 25,913 $ 56,656 $ 51,026 Investment Securities 2,312 2,420 2,091 4,732 4,287 Other 87 112 162 199 321 Total Interest Income 31,147 30,440 28,166 61,587 55,634 INTEREST EXPENSE Deposits 3,513 3,671 5,170 7,184 10,894 Notes Payable — 61 111 61 226 FHLB Advances 228 228 1,064 456 2,091 Subordinated Debentures 1,112 1,085 479 2,197 872 Federal Funds Purchased 6 — — 6 107 Total Interest Expense 4,859 5,045 6,824 9,904 14,190 NET INTEREST INCOME 26,288 25,395 21,342 51,683 41,444 Provision for Loan Losses 1,600 1,100 3,000 2,700 5,100 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 24,688 24,295 18,342 48,983 36,344 NONINTEREST INCOME Customer Service Fees 231 234 135 465 375 Net Gain on Sales of Available for Sale Securities 702 — 1,361 702 1,364 Other Income 670 774 481 1,444 1,957 Total Noninterest Income 1,603 1,008 1,977 2,611 3,696 NONINTEREST EXPENSE Salaries and Employee Benefits 7,512 7,102 6,348 14,614 12,802 Occupancy and Equipment 980 1,055 672 2,035 1,385 Other Expense 2,985 2,766 3,691 5,751 6,270 Total Noninterest Expense 11,477 10,923 10,711 22,400 20,457 INCOME BEFORE INCOME TAXES 14,814 14,380 9,608 29,194 19,583 Provision for Income Taxes 3,821 3,709 2,010 7,530 4,542 NET INCOME $ 10,993 $ 10,671 $ 7,598 $ 21,664 $ 15,041 EARNINGS PER SHARE Basic $ 0.39 $ 0.38 $ 0.26 $ 0.77 $ 0.52 Diluted 0.38 0.37 0.26 0.75 0.51 Dividends Paid Per Share — — — — — Bridgewater Bancshares, Inc. and Subsidiaries Analysis of Average Balances, Yields and Rates (year-to-date) (dollars in thousands, except per share data) (Unaudited) For the Six Months Ended June 30, 2021 June 30, 2020 Average Interest Yield/ Average Interest Yield/ Balance & Fees Rate Balance & Fees Rate (dollars in thousands) Interest Earning Assets: Cash Investments $ 96,724 $ 67 0.14 % $ 69,267 $ 96 0.28 % Investment Securities: Taxable Investment Securities 307,898 3,371 2.21 195,873 2,691 2.76 Tax-Exempt Investment Securities (1) 78,985 1,723 4.40 93,260 2,020 4.36 Total Investment Securities 386,883 5,094 2.66 289,133 4,711 3.28 Paycheck Protection Program Loans (2) 149,098 3,631 4.91 70,037 873 2.51 Loans (1)(2) 2,313,295 53,085 4.63 1,983,641 50,220 5.09 Total Loans 2,462,393 56,716 4.64 2,053,678 51,093 5.00 Federal Home Loan Bank Stock 5,636 132 4.74 10,370 225 4.37 Total Interest Earning Assets 2,951,636 62,009 4.24 % 2,422,448 56,125 4.66 % Noninterest Earning Assets 57,228 47,208 Total Assets $ 3,008,864 $ 2,469,656 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 392,732 $ 942 0.48 % $ 259,704 $ 808 0.63 % Savings and Money Market Deposits 744,480 1,949 0.53 527,445 3,232 1.23 Time Deposits 338,497 2,341 1.39 382,256 4,299 2.26 Brokered Deposits 391,167 1,952 1.01 269,000 2,555 1.91 Total Interest Bearing Deposits 1,866,876 7,184 0.78 1,438,405 10,894 1.52 Federal Funds Purchased 4,993 6 0.24 12,422 107 1.74 Notes Payable 3,343 61 3.66 12,253 226 3.71 FHLB Advances 57,500 456 1.60 183,099 2,091 2.30 Subordinated Debentures 73,819 2,197 6.00 27,986 872 6.27 Total Interest Bearing Liabilities 2,006,531 9,904 1.00 % 1,674,165 14,190 1.70 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 704,391 523,828 Other Noninterest Bearing Liabilities 18,384 18,708 Total Noninterest Bearing Liabilities 722,775 542,536 Shareholders' Equity 279,558 252,955 Total Liabilities and Shareholders' Equity $ 3,008,864 $ 2,469,656 Net Interest Income / Interest Rate Spread 52,105 3.24 % 41,935 2.96 % Net Interest Margin (3) 3.56 % 3.48 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities and Loans (422 ) (491 ) Net Interest Income $ 51,683 $ 41,444 _________________________________ (1) Interest income and average rates for tax-exempt investment securities and loans are presented on a tax-equivalent basis, assuming a statutory federal income tax rate of 21% (2) Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs. (3) Net interest margin includes the tax equivalent adjustment and represents the annualized results of: (i) the difference between interest income on interest earning assets and the interest expense on interest bearing liabilities, divided by (ii) average interest earning assets for the period. Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended For the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020 Pre-Provision Net Revenue Noninterest Income $ 1,603 $ 1,008 $ 1,977 $ 2,611 $ 3,696 Less: Gain on sales of Securities (702 ) — (1,361 ) (702 ) (1,364 ) Total Operating Noninterest Income 901 1,008 616 1,909 2,332 Plus: Net Interest income 26,288 25,395 21,342 51,683 41,444 Net Operating Revenue $ 27,189 $ 26,403 $ 21,958 $ 53,592 $ 43,776 Noninterest Expense $ 11,477 $ 10,923 $ 10,711 $ 22,400 $ 20,457 Less: Amortization of Tax Credit Investments (140 ) (118 ) (362 ) (258 ) (447 ) Less: FHLB Advance Prepayment Fees — — (1,430 ) — (1,430 ) Total Operating Noninterest Expense $ 11,337 $ 10,805 $ 8,919 $ 22,142 $ 18,580 Pre-Provision Net Revenue $ 15,852 $ 15,598 $ 13,039 $ 31,450 $ 25,196 Plus: Non-Operating Revenue Adjustments 702 — 1,361 702 1,364 Less: Provision for Loan Losses 1,600 1,100 3,000 2,700 5,100 Non-Operating Expense Adjustments 140 118 1,792 258 1,877 Provision for Income Taxes 3,821 3,709 2,010 7,530 4,542 Net Income $ 10,993 $ 10,671 $ 7,598 $ 21,664 $ 15,041 Average Assets $ 3,076,712 $ 2,940,262 $ 2,622,272 $ 3,008,864 $ 2,469,656 Pre-Provision Net Revenue Return on Average Assets 2.07 % 2.15 % 2.00 % 2.11 % 2.05 % As of and for the Three Months Ended As of and for the Six Months Ended June 30, March 31 June 30, June 30, June 30, 2021 2021 2020 2021 2020 Core Net Interest Margin Net Interest Income (Tax-Equivalent Basis) $ 26,495 $ 25,609 $ 21,581 $ 52,105 $ 41,935 Less: Loan Fees (1,023 ) (1,202 ) (1,264 ) (2,225 ) (2,571 ) Less: PPP Interest and Fees (1,767 ) (1,864 ) (873 ) (3,631 ) (873 ) Core Net Interest Income $ 23,705 $ 22,543 $ 19,444 $ 46,249 $ 38,491 Average Interest Earning Assets 3,019,437 2,883,084 2,567,292 2,951,636 2,422,448 Less: Average PPP Loans (149,312 ) (148,881 ) (139,235 ) (149,098 ) (70,037 ) Core Average Interest Earning Assets $ 2,870,125 $ 2,734,203 $ 2,428,057 $ 2,802,538 $ 2,352,411 Core Net Interest Margin 3.31 % 3.34 % 3.22 % 3.33 % 3.29 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended For the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020 Efficiency Ratio Noninterest Expense $ 11,477 $ 10,923 $ 10,711 $ 22,400 $ 20,457 Less: Amortization of Intangible Assets (47 ) (48 ) (47 ) (95 ) (95 ) Adjusted Noninterest Expense $ 11,430 $ 10,875 $ 10,664 $ 22,305 $ 20,362 Net Interest Income 26,288 25,395 21,342 51,683 41,444 Noninterest Income 1,603 1,008 1,977 2,611 3,696 Less: Gain on Sales of Securities (702 ) — (1,361 ) (702 ) (1,364 ) Adjusted Operating Revenue $ 27,189 $ 26,403 $ 21,958 $ 53,592 $ 43,776 Efficiency Ratio 42.0 % 41.2 % 48.6 % 41.6 % 46.5 % Adjusted Efficiency Ratio Noninterest Expense $ 11,477 $ 10,923 $ 10,711 $ 22,400 $ 20,457 Less: Amortization of Tax Credit Investments (140 ) (118 ) (362 ) (258 ) (447 ) Less: FHLB Advance Prepayment Fees — — (1,430 ) — (1,430 ) Less: Amortization of Intangible Assets (47 ) (48 ) (47 ) (95 ) (95 ) Adjusted Noninterest Expense $ 11,290 $ 10,757 $ 8,872 $ 22,047 $ 18,485 Net Interest Income 26,288 25,395 21,342 51,683 41,444 Noninterest Income 1,603 1,008 1,977 2,611 3,696 Less: Gain on Sales of Securities (702 ) — (1,361 ) (702 ) (1,364 ) Adjusted Operating Revenue $ 27,189 $ 26,403 $ 21,958 $ 53,592 $ 43,776 Adjusted Efficiency Ratio 41.5 % 40.7 % 40.4 % 41.1 % 42.2 % For the Three Months Ended For the Six Months Ended June 30, March 31 June 30, June 30, June 30, 2021 2021 2020 2021 2020 Adjusted Noninterest Expense to Average Assets Noninterest Expense $ 11,477 $ 10,923 $ 10,711 $ 22,400 $ 20,457 Less: Amortization of Tax Credit Investments (140 ) (118 ) (362 ) (258 ) (447 ) Less: FHLB Advance Prepayment Fees — — (1,430 ) — (1,430 ) Adjusted Noninterest Expense $ 11,337 $ 10,805 $ 8,919 $ 22,142 $ 18,580 Average Assets $ 3,076,712 $ 2,940,262 $ 2,622,272 $ 3,008,864 $ 2,469,656 Adjusted Noninterest Expense to Average Assets 1.48 % 1.49 % 1.37 % 1.48 % 1.51 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) As of and for the Three Months Ended As of and for the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020 Tangible Common Equity and Tangible Common Equity/Tangible Assets Common Equity $ 290,830 $ 279,171 $ 257,190 Less: Intangible Assets (3,200 ) (3,248 ) (3,391 ) Tangible Common Equity $ 287,630 $ 275,923 $ 253,799 Total Assets $ 3,162,612 $ 3,072,359 $ 2,754,463 Less: Intangible Assets (3,200 ) (3,248 ) (3,391 ) Tangible Assets $ 3,159,412 $ 3,069,111 $ 2,751,072 Tangible Common Equity/Tangible Assets 9.10 % 8.99 % 9.23 % Tangible Book Value Per Share Book Value Per Common Share $ 10.33 $ 9.92 $ 8.92 Less: Effects of Intangible Assets (0.11 ) (0.12 ) (0.12 ) Tangible Book Value Per Common Share $ 10.22 $ 9.80 $ 8.80 Return on Average Tangible Common Equity Net Income $ 10,993 $ 10,671 $ 7,598 $ 21,664 $ 15,041 Average Common Equity $ 286,311 $ 272,729 $ 255,109 $ 279,558 $ 252,955 Less: Effects of Average Intangible Assets (3,228 ) (3,276 ) (3,419 ) (3,251 ) (3,442 ) Average Tangible Common Equity $ 283,083 $ 269,453 $ 251,690 $ 276,307 $ 249,513 Return on Average Tangible Common Equity 15.58 % 16.06 % 12.14 % 15.81 % 12.12 % Three Months Ended June 30, March 31, December 31, September 30, June 30, 2021 2021 2020 2020 2020 Tangible Common Equity Common Equity $ 290,830 $ 279,171 $ 265,405 $ 265,432 $ 257,190 Less: Intangible Assets (3,200 ) (3,248 ) (3,296 ) (3,344 ) (3,391 ) Tangible Common Equity $ 287,630 $ 275,923 $ 262,109 $ 262,088 $ 253,799 View source version on businesswire.com: https://www.businesswire.com/news/home/20210729005241/en/Contacts Justin Horstman Director of Investor Relations investorrelations@bwbmn.com 952-542-5169
Bridgewater Bancshares, Inc. (Nasdaq: BWB) (the Company), the parent company of Bridgewater Bank (the Bank), today announced net income of $11.0 million for the second quarter of 2021, a 3.0% increase over net income of $10.7 million for the first quarter of 2021, and a 44.7% increase over net income of $7.6 million for the second quarter of 2020. Net income per diluted common share for the second quarter of 2021 was $0.38, a 2.4% increase compared to $0.37 per diluted common share for the first quarter of 2021, and a 44.9% increase, compared to $0.26 per diluted common share for the same period in 2020. “Bridgewater reported another quarter of record net income driven by robust organic loan growth, superb asset quality and a highly efficient business model,” said Chairman, Chief Executive Officer, and President, Jerry Baack. “Our unique ability to generate profitable loan growth in the current market has been the result of client acquisition opportunities from M&A-related market disruption, the expansion of our lending teams through opportunistic hires, and our strong brand and service model in the Twin Cities. This loan growth, along with a stabilizing core net interest margin, has led to continued revenue growth, all while maintaining consistently low levels of net charge-offs and nonperforming assets. With our proven growth engine and an efficiency ratio among the lowest in the industry, we believe we are well-positioned to continue gaining market share in the attractive Twin Cities market.” Second Quarter 2021 Financial Results Diluted Nonperforming Adjusted ROA PPNR ROA (1) ROE earnings per share assets to total assets efficiency ratio (1) 1.43% 2.07% 15.40% $ 0.38 0.02% 41.5% _________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. Second Quarter 2021 Highlights Diluted earnings per common share were $0.38 for the second quarter of 2021, compared to $0.37 per common share for the first quarter of 2021. Annualized return on average assets (ROA) and annualized return on average common equity (ROE) for the second quarter of 2021 were 1.43% and 15.40%, compared to ROA and ROE of 1.47% and 15.87%, respectively, for the first quarter of 2021. Pre-provision net revenue (PPNR), a non-GAAP financial measure, was $15.9 million for the second quarter of 2021, an increase of 1.6%, compared to $15.6 million from the first quarter of 2021. PPNR ROA, a non-GAAP financial measure, was 2.07% for the second quarter of 2021, compared to 2.15% for the first quarter of 2021. Gross loans increased $168.1 million in the second quarter of 2021, or 27.8% annualized, compared to the first quarter of 2021. Gross loans, excluding Paycheck Protection Program (PPP) loans, increased $232.2 million in the second quarter of 2021, or 41.2% annualized, compared to the first quarter of 2021. Deposits increased $82.3 million in the second quarter of 2021, or 12.5% annualized, compared to the first quarter of 2021. Net interest margin was 3.52% for the second quarter of 2021, compared to 3.60% in the first quarter of 2021. The adjusted efficiency ratio, a non-GAAP financial measure which excludes the impact of certain non-routine income and expenses from noninterest expense, was 41.5% for the second quarter of 2021, compared to 40.7% for the first quarter of 2021. A loan loss provision of $1.6 million was recorded in the second quarter of 2021 to support strong organic loan growth. The allowance for loan losses to total loans was 1.45% at June 30, 2021, compared to 1.48% at March 31, 2021. The allowance for loan losses to total loans, excluding PPP loans, was 1.50% at June 30, 2021, compared to 1.59% at March 31, 2021. Annualized net loan charge-offs (recoveries) as a percentage of average loans were 0.00% for the second quarter of 2021, compared to (0.01)% for the first quarter of 2021. Tangible book value per share, a non-GAAP financial measure, increased 4.3%, or $0.42, to $10.22 at June 30, 2021, compared to $9.80 at March 31, 2021. The Company purchased $25.0 million of bank owned life insurance policies on certain officers. Recent Developments On July 8, 2021, the Company announced the completion of a private placement of $30.0 million in aggregate principal amount of 3.25% fixed-to-floating rate subordinated notes due 2031. The Company intends to use the net proceeds of the private placement for general corporate purposes, including support for organic growth plans, support for bank level capital ratios and possible redemption or repurchase of currently outstanding indebtedness. Key Financial Measures As of and for the Three Months Ended As of and for the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020 Per Common Share Data Basic Earnings Per Share $ 0.39 $ 0.38 $ 0.26 $ 0.77 $ 0.52 Diluted Earnings Per Share 0.38 0.37 0.26 0.75 0.51 Book Value Per Share 10.33 9.92 8.92 10.33 8.92 Tangible Book Value Per Share (1) 10.22 9.80 8.80 10.22 8.80 Basic Weighted Average Shares Outstanding 28,040,762 28,017,366 28,676,441 28,029,129 28,733,968 Diluted Weighted Average Shares Outstanding 29,128,181 28,945,212 29,165,157 29,048,424 29,350,426 Shares Outstanding at Period End 28,162,777 28,132,929 28,837,560 28,162,777 28,837,560 Selected Performance Ratios Return on Average Assets (Annualized) 1.43 % 1.47 % 1.17 % 1.45 % 1.22 % Pre-Provision Net Revenue Return on Average Assets (Annualized) (1) 2.07 2.15 2.00 2.11 2.05 Return on Average Common Equity (Annualized) 15.40 15.87 11.98 15.63 11.96 Return on Average Tangible Common Equity (Annualized) (1) 15.58 16.06 12.14 15.81 12.12 Yield on Interest Earning Assets 4.17 4.31 4.45 4.24 4.66 Yield on Total Loans, Gross 4.56 4.74 4.85 4.64 5.00 Cost of Interest Bearing Liabilities 0.96 1.04 1.58 1.00 1.70 Cost of Total Deposits 0.54 0.59 0.99 0.56 1.12 Net Interest Margin (2) 3.52 3.60 3.38 3.56 3.48 Core Net Interest Margin (1)(2) 3.31 3.34 3.22 3.33 3.29 Efficiency Ratio (1) 42.0 41.2 48.6 41.6 46.5 Adjusted Efficiency Ratio (1) 41.5 40.7 40.4 41.1 42.2 Noninterest Expense to Average Assets (Annualized) 1.50 1.51 1.64 1.50 1.67 Adjusted Noninterest Expense to Average Assets (Annualized) (1) 1.48 1.49 1.37 1.48 1.51 Loan to Deposit Ratio 95.3 91.9 97.8 Core Deposits to Total Deposits(3) 81.2 83.5 75.7 Tangible Common Equity to Tangible Assets (1) 9.10 8.99 9.23 Capital Ratios (Bank Only) (4) Tier 1 Leverage Ratio 10.57 % 10.65 % 11.36 % Tier 1 Risk-based Capital Ratio 11.24 12.08 12.96 Total Risk-based Capital Ratio 12.49 13.33 14.21 Capital Ratios (Consolidated) (4) Tier 1 Leverage Ratio 9.08 % 9.11 % 9.94 % Tier 1 Risk-based Capital Ratio 9.67 10.34 11.39 Total Risk-based Capital Ratio 13.49 14.46 15.99 _________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. (2) Amounts calculated on a tax-equivalent basis using the statutory federal tax rate of 21%. (3) Core deposits are defined as total deposits less brokered deposits and certificates of deposit greater than $250,000. (4) Preliminary data. Current period subject to change prior to filings with applicable regulatory agencies. Selected Financial Data June 30, March 31, December 31, September 30, June 30, (dollars in thousands) 2021 2021 2020 2020 2020 Selected Balance Sheet Data Total Assets $ 3,162,612 $ 3,072,359 $ 2,927,345 $ 2,774,564 $ 2,754,463 Total Loans, Gross 2,594,186 2,426,123 2,326,428 2,259,228 2,193,778 Allowance for Loan Losses 37,591 35,987 34,841 31,381 27,633 Goodwill and Other Intangibles 3,200 3,248 3,296 3,344 3,391 Deposits 2,720,906 2,638,654 2,501,636 2,273,044 2,242,051 Tangible Common Equity (1) 287,630 275,923 262,109 262,088 253,799 Total Shareholders' Equity 290,830 279,171 265,405 265,432 257,190 Average Total Assets - Quarter-to-Date 3,076,712 2,940,262 2,816,032 2,711,755 2,622,272 Average Common Equity - Quarter-to-Date 286,311 272,729 265,716 263,195 255,109 _________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. For the Three Months Ended For the Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2021 2021 2020 2021 2020 Selected Income Statement Data Interest Income $ 31,147 $ 30,440 $ 28,166 $ 61,587 $ 55,634 Interest Expense 4,859 5,045 6,824 9,904 14,190 Net Interest Income 26,288 25,395 21,342 51,683 41,444 Provision for Loan Losses 1,600 1,100 3,000 2,700 5,100 Net Interest Income after Provision for Loan Losses 24,688 24,295 18,342 48,983 36,344 Noninterest Income 1,603 1,008 1,977 2,611 3,696 Noninterest Expense 11,477 10,923 10,711 22,400 20,457 Income Before Income Taxes 14,814 14,380 9,608 29,194 19,583 Provision for Income Taxes 3,821 3,709 2,010 7,530 4,542 Net Income $ 10,993 $ 10,671 $ 7,598 $ 21,664 $ 15,041 Income Statement Net Interest Income Net interest income was $26.3 million for the second quarter of 2021, an increase of $893,000, or 3.5%, from $25.4 million in the first quarter of 2021, and an increase of $4.9 million, or 23.2%, from $21.3 million in the second quarter of 2020. The linked-quarter and year-over-year increases in net interest income were primarily due to growth in average interest earning assets, lower rates paid on deposits, and the recognition of PPP loan origination fees, offset partially by declining yields on loans. Average interest earning assets were $3.02 billion for the second quarter of 2021, an increase of $136.4 million, or 4.7%, from $2.88 billion for the first quarter of 2021, and an increase of $452.1 million, or 17.6%, from $2.57 billion for the second quarter of 2020. The linked-quarter increase in average interest earning assets was primarily due to robust organic growth in the loan portfolio. The year-over-year increase in average interest earning assets was primarily due to strong organic growth in the loan portfolio, as well as continued purchases of investment securities. Net interest margin (on a fully tax-equivalent basis) for the second quarter of 2021 was 3.52%, an 8 basis point decline from 3.60% in the first quarter of 2021, and a 14 basis point increase from 3.38% in the second quarter of 2020. Core net interest margin (on a fully tax-equivalent basis), a non-GAAP financial measure which excludes the impact of loan fees and PPP balances, interest, and fees, for the second quarter of 2021 was 3.31%, a 3 basis point decline from 3.34% in the first quarter of 2021, and a 9 basis point increase from 3.22% in the second quarter of 2020. While the origination volume of PPP loans earning 1.00% negatively impacted net interest margin, the recognition of fees associated with the originations has benefited net interest margin for each of the past three quarters. The SBA began forgiving PPP loans, which has accelerated the recognition of PPP fees starting in the fourth quarter of 2020 and continuing into the second quarter of 2021. The Company recognized $1.4 million of PPP origination fees during the second quarter of 2021, compared to $1.5 million during the first quarter of 2021. The elevated fee recognition is illustrated in the 4.75% PPP loan yield for the second quarter of 2021. The following table summarizes PPP loan originations and net origination fees as of June 30, 2021: Originated Outstanding Program Lifetime Number Principal Number Principal Net Origination Net Origination (dollars in thousands) of Loans Balance of Loans Balance Fees Generated Fees Earned Round One PPP Loans 1,200 $ 181,600 225 $ 27,184 $ 5,706 $ 5,330 Round Two PPP Loans 651 78,386 606 71,888 3,544 498 Totals 1,851 $ 259,986 831 $ 99,072 $ 9,250 $ 5,828 Interest income was $31.1 million for the second quarter of 2021, an increase of $707,000, or 2.3%, from $30.4 million in the first quarter of 2021, and an increase of $3.0 million, or 10.6%, from $28.2 million in the second quarter of 2020. The yield on interest earning assets (on a fully tax-equivalent basis) was 4.17% in the second quarter of 2021, compared to 4.31% in the first quarter of 2021, and 4.45% in the second quarter of 2020. The linked-quarter decrease in the yield on interest earning assets was primarily due to the historically low interest rate environment resulting in a lower loan yield and lower loan fees recognized, offset partially by $1.4 million of PPP loan origination fees. The year-over-year decline in the yield on interest earning assets was primarily due to the historically low interest rate environment resulting in lower loan and security yields. Loan interest income and loan fees remain the primary contributing factors to the changes in yield on interest earning assets. The aggregate loan yield, excluding PPP loans, decreased to 4.54% in the second quarter of 2021, which was 18 basis points lower than 4.72% in the first quarter of 2021, and 47 basis points lower than 5.01% in the second quarter of 2020. While loan fees have maintained a relatively stable contribution to the aggregate loan yield, the historically low yield curve has resulted in a declining core yield on loans in comparison to both prior periods. A summary of interest and fees recognized on loans, excluding PPP loans, for the periods indicated is as follows: Three Months Ended June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 Interest 4.37 % 4.50 % 4.59 % 4.69 % 4.76 % Fees 0.17 0.22 0.28 0.24 0.25 Yield on Loans, Excluding PPP Loans 4.54 % 4.72 % 4.87 % 4.93 % 5.01 % Interest expense was $4.9 million for the second quarter of 2021, a decrease of $186,000, or 3.7%, from $5.0 million in the first quarter of 2021, and a decrease of $2.0 million, or 28.8%, from $6.8 million in the second quarter of 2020. The cost of interest bearing liabilities declined 8 basis points on a linked-quarter basis from 1.04% in the first quarter of 2021 to 0.96% in the second quarter of 2021, primarily due to lower rates paid on deposits. On a year-over-year basis, the cost of interest bearing liabilities decreased 62 basis points from 1.58% in the second quarter of 2020 to 0.96% in the second quarter of 2021, primarily due to lower rates paid on deposits, the payoff of the Company’s notes payable, and the early extinguishment of $94.0 million of longer term FHLB advances, offset partially by strong growth of interest bearing deposits and additional subordinated debentures. Interest expense on deposits was $3.5 million for the second quarter of 2021, a decrease of $159,000, or 4.3%, from $3.7 million in the first quarter of 2021, and a decrease of $1.7 million, or 32.1%, from $5.2 million in the second quarter of 2020. The cost of total deposits declined 5 basis points on a linked-quarter basis from 0.59% in the first quarter of 2021, and declined 45 basis points on a year-over-year basis from 0.99% in the second quarter of 2020, to 0.54% in the second quarter of 2021, primarily due to deposit rate cuts consistent with a lower rate environment and the downward repricing of time deposits. The Company anticipates more opportunities to lower the cost of total deposits due to continued deposit repricing as time deposits mature and the recent success of adding efficient, low-cost brokered deposits. A summary of the Company’s average balances, interest yields and rates, and net interest margin for the three months ended June 30, 2021, March 31, 2021, and June 30, 2020 is as follows: For the Three Months Ended June 30, 2021 March 31, 2021 June 30, 2020 Average Interest Yield/ Average Interest Yield/ Average Interest Yield/ Balance & Fees Rate Balance & Fees Rate Balance & Fees Rate (dollars in thousands) Interest Earning Assets: Cash Investments $ 88,067 $ 33 0.15 % $ 105,477 $ 34 0.13 % $ 109,073 $ 37 0.14 % Investment Securities: Taxable Investment Securities 314,049 1,647 2.10 301,680 1,723 2.32 203,559 1,304 2.58 Tax-Exempt Investment Securities (1) 77,029 842 4.38 80,963 881 4.41 91,793 996 4.37 Total Investment Securities 391,078 2,489 2.55 382,643 2,604 2.76 295,352 2,300 3.13 Paycheck Protection Program Loans (2) 149,312 1,767 4.75 148,881 1,864 5.08 139,235 873 2.52 Loans (1)(2) 2,384,759 27,011 4.54 2,241,038 26,074 4.72 2,013,163 25,070 5.01 Total Loans 2,534,071 28,778 4.56 2,389,919 27,938 4.74 2,152,398 25,943 4.85 Federal Home Loan Bank Stock 6,221 54 3.51 5,045 78 6.28 10,469 125 4.81 Total Interest Earning Assets 3,019,437 31,354 4.17 % 2,883,084 30,654 4.31 % 2,567,292 28,405 4.45 % Noninterest Earning Assets 57,275 57,178 54,980 Total Assets $ 3,076,712 $ 2,940,262 $ 2,622,272 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 421,132 $ 520 0.50 % $ 364,017 $ 422 0.47 % $ 272,565 $ 377 0.56 % Savings and Money Market Deposits 764,632 940 0.49 724,104 1,008 0.56 521,313 1,327 1.02 Time Deposits 332,346 1,075 1.30 344,715 1,267 1.49 388,357 2,122 2.20 Brokered Deposits 379,768 978 1.03 402,694 974 0.98 319,711 1,344 1.69 Total Interest Bearing Deposits 1,897,878 3,513 0.74 1,835,530 3,671 0.81 1,501,946 5,170 1.38 Federal Funds Purchased 9,932 6 0.24 — — — 9 — 0.72 Notes Payable — — — 6,722 61 3.66 12,000 111 3.72 FHLB Advances 57,500 228 1.59 57,500 228 1.61 193,819 1,064 2.21 Subordinated Debentures 73,862 1,112 6.04 73,776 1,085 5.96 31,228 479 6.17 Total Interest Bearing Liabilities 2,039,172 4,859 0.96 % 1,973,528 5,045 1.04 % 1,739,002 6,824 1.58 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 732,299 676,173 603,456 Other Noninterest Bearing Liabilities 18,930 17,832 24,705 Total Noninterest Bearing Liabilities 751,229 694,005 628,161 Shareholders' Equity 286,311 272,729 255,109 Total Liabilities and Shareholders' Equity $ 3,076,712 $ 2,940,262 $ 2,622,272 Net Interest Income / Interest Rate Spread 26,495 3.21 % 25,609 3.27 % 21,581 2.87 % Net Interest Margin (3) 3.52 % 3.60 % 3.38 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities and Loans (207 ) (214 ) (239 ) Net Interest Income $ 26,288 $ 25,395 $ 21,342 _________________________________ (1) Interest income and average rates for tax-exempt investment securities and loans are presented on a tax-equivalent basis, assuming a statutory federal income tax rate of 21%. (2) Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs. (3) Net interest margin includes the tax equivalent adjustment and represents the annualized results of: (i) the difference between interest income on interest earning assets and the interest expense on interest bearing liabilities, divided by (ii) average interest earning assets for the period. Provision for Loan Losses The provision for loan losses was $1.6 million for the second quarter of 2021, an increase of $500,000 from $1.1 million for the first quarter of 2021, and a decrease of $1.4 million from $3.0 million for the second quarter of 2020. The provision recorded in the second quarter of 2021 was primarily attributable to growth of the loan portfolio. The allowance for loan losses to total loans was 1.45% at June 30, 2021, compared to 1.48% at March 31, 2021, and 1.26% at June 30, 2020. The allowance for loan losses to total loans, excluding PPP loans, was 1.50% at June 30, 2021, compared to 1.59% at March 31, 2021, and 1.37% at June 30, 2020. As an emerging growth company, the Company is not subject to Accounting Standards Update No. 2016-13 “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments,“ or CECL, until January 1, 2023. The following table presents the activity in the Company’s allowance for loan losses for the periods indicated: Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2021 2021 2020 2021 2020 Balance at Beginning of Period $ 35,987 $ 34,841 $ 24,585 $ 34,841 $ 22,526 Provision for Loan Losses 1,600 1,100 3,000 2,700 5,100 Charge-offs (3 ) (14 ) (1 ) (17 ) (48 ) Recoveries 7 60 49 67 55 Balance at End of Period $ 37,591 $ 35,987 $ 27,633 $ 37,591 $ 27,633 Noninterest Income Noninterest income was $1.6 million for the second quarter of 2021, an increase of $595,000 from $1.0 million for the first quarter of 2021, and a decrease of $374,000 from $2.0 million for the second quarter of 2020. The linked-quarter increase was primarily due to increased gains on sales of securities, offset partially by a decrease in letter of credit fees. The year-over-year decrease was primarily due to lower gains on sales of securities, offset partially by increased customer service fees and other income. The following table presents the major components of noninterest income for the periods indicated: Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2021 2021 2020 2021 2020 Noninterest Income: Customer Service Fees $ 231 $ 234 $ 135 $ 465 $ 375 Net Gain on Sales of Securities 702 — 1,361 702 1,364 Letter of Credit Fees 231 327 265 558 539 Debit Card Interchange Fees 141 130 99 271 191 Swap Fees — — — — 907 Other Income 298 317 117 615 320 Totals $ 1,603 $ 1,008 $ 1,977 $ 2,611 $ 3,696 Noninterest Expense Noninterest expense was $11.5 million for the second quarter of 2021, an increase of $554,000 from $10.9 million for the first quarter of 2021, and an increase of $766,000 from $10.7 million for the second quarter of 2020. The linked-quarter increase was primarily due to an increase in salaries and employee benefits and technology expenses. The year-over-year increase was primarily attributable to increased salaries and employee benefits, occupancy and equipment, technology, and marketing and advertising expenses, offset partially by a $1.4 million decrease in FHLB advance prepayment fees incurred in the second quarter of 2020, as well as lower amortization of tax credit investments. The following table presents the major components of noninterest expense for the periods indicated: Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2021 2021 2020 2021 2020 Noninterest Expense: Salaries and Employee Benefits $ 7,512 $ 7,102 $ 6,348 $ 14,614 $ 12,802 Occupancy and Equipment 980 1,055 672 2,035 1,385 FDIC Insurance Assessment 290 315 168 605 358 Data Processing 300 291 238 591 467 Professional and Consulting Fees 552 544 423 1,096 908 Information Technology and Telecommunications 549 462 326 1,011 592 Marketing and Advertising 314 286 85 600 551 Intangible Asset Amortization 47 48 47 95 95 Amortization of Tax Credit Investments 140 118 362 258 447 FHLB Advance Prepayment Fees — — 1,430 — 1,430 Other Expense 793 702 612 1,495 1,422 Totals $ 11,477 $ 10,923 $ 10,711 $ 22,400 $ 20,457 In the second quarter of 2021, the Company attracted 18 new hires in lending, deposit gathering, technology, risk management, and other supportive roles, which continued to demonstrate the Company’s status as a preferred employer amidst ongoing market disruption. The Company reached 214 full-time equivalent employees at June 30, 2021, compared to 200 employees at March 31, 2021, and 173 employees at June 30, 2020. The efficiency ratio, a non-GAAP financial measure, was 42.0% for the second quarter of 2021, compared to 41.2% for the first quarter of 2021, and 48.6% for the second quarter of 2020. Excluding the impact of certain non-routine income and expenses, the adjusted efficiency ratio, a non-GAAP financial measure, was 41.5% for the second quarter of 2021, 40.7% for the first quarter of 2021 and 40.4% for the second quarter of 2020. The efficiencies of the Company’s “branch-light” model have positioned the Company well for when the pandemic ends, and going forward, providing more flexibility for the Company to make significant investments in technology as the industry adapts to evolving client behavior. Income Taxes The effective combined federal and state income tax rate for the first and second quarters of 2021 was 25.8%, an increase from 20.9% for the second quarter of 2020. Balance Sheet Total assets at June 30, 2021 were $3.16 billion, a 2.9% increase from $3.07 billion at March 31, 2021, and a 14.8% increase from $2.75 billion at June 30, 2020. The linked-quarter increase in total assets was primarily due to robust organic loan growth, offset partially by a corresponding decrease in cash and cash equivalents. The year-over-year increase in total assets was primarily due to robust organic loan growth, as well as deploying excess liquidity into investment securities. Total gross loans at June 30, 2021 were $2.59 billion, an increase of $168.1 million, or 6.9%, over total gross loans of $2.43 billion at March 31, 2021, and an increase of $400.4 million, or 18.3%, over total gross loans of $2.19 billion at June 30, 2020. The increase in the loan portfolio during the second quarter of 2021 was primarily due to growth in the multifamily and construction and land development segments, offset partially by declining PPP loan balances. When excluding the PPP loans altogether, gross loans grew $232.2 million during the second quarter of 2021, or 41.2% on an annualized basis. The Company's continued strong loan growth has been driven by M&A-related market disruption in the Twin Cities resulting in client and banker acquisition opportunities, PPP-related client acquisition opportunities, the expansion of the talented lending teams, and the strong and growing brand in the Twin Cities market. The following table presents the dollar composition of the Company’s loan portfolio, by category, at the dates indicated: June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 (dollars in thousands) Commercial $ 321,474 $ 301,023 $ 304,220 $ 287,254 $ 302,536 Paycheck Protection Program 99,072 163,258 138,454 181,596 180,228 Construction and Land Development 251,573 193,372 170,217 175,882 191,768 Real Estate Mortgage: 1 - 4 Family Mortgage 277,943 294,964 294,479 286,089 289,456 Multifamily 790,275 665,415 626,465 585,814 522,491 CRE Owner Occupied 87,507 79,665 75,604 75,963 73,539 CRE Nonowner Occupied 758,101 720,396 709,300 660,058 627,651 Total Real Estate Mortgage Loans 1,913,826 1,760,440 1,705,848 1,607,924 1,513,137 Consumer and Other 8,241 8,030 7,689 6,572 6,109 Total Loans, Gross 2,594,186 2,426,123 2,326,428 2,259,228 2,193,778 Allowance for Loan Losses (37,591 ) (35,987 ) (34,841 ) (31,381 ) (27,633 ) Net Deferred Loan Fees (11,450 ) (11,273 ) (9,151 ) (10,367 ) (10,287 ) Total Loans, Net $ 2,545,145 $ 2,378,863 $ 2,282,436 $ 2,217,480 $ 2,155,858 Total deposits at June 30, 2021 were $2.72 billion, an increase of $82.3 million, or 3.1%, over total deposits of $2.64 billion at March 31, 2021, and an increase of $478.9 million, or 21.4%, over total deposits of $2.24 billion at June 30, 2020. Deposit growth in the second quarter of 2021 was primarily due to an increase in noninterest bearing transaction deposits and brokered deposits, offset partially by a decline in savings and money market deposits and time deposits. Similar to the loan portfolio, the growth in core deposits has been a result of successful new client and banker acquisition initiatives and the strong, growing brand in the Twin Cities market. Brokered deposits increased back to levels last seen in the fourth quarter of 2020 due to the opportunity to obtain $75.0 million in funding at 1 basis point at various short-term maturities ranging from 3-12 months. As illustrated, the brokered deposit market provides flexibility in structure, optionality and efficiency not provided in traditional, retail deposit channels. Given the fluid environment, management believes deposits could experience fluctuations in future periods. The following table presents the dollar composition of the Company’s deposit portfolio, by category, at the dates indicated: June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 (dollars in thousands) Noninterest Bearing Transaction Deposits $ 758,023 $ 712,999 $ 671,903 $ 685,773 $ 648,869 Interest Bearing Transaction Deposits 432,123 433,344 366,290 322,253 285,386 Savings and Money Market Deposits 761,485 791,583 657,617 498,397 516,543 Time Deposits 321,857 344,581 353,543 363,897 382,187 Brokered Deposits 447,418 356,147 452,283 402,724 409,066 Total Deposits $ 2,720,906 $ 2,638,654 $ 2,501,636 $ 2,273,044 $ 2,242,051 Total shareholders’ equity at June 30, 2021 was $290.8 million, an increase of $11.7 million, or 4.2%, over total shareholders’ equity of $279.2 million at March 31, 2021, and an increase of $33.6 million, or 13.1%, over total shareholders’ equity of $257.2 million at June 30, 2020. The linked-quarter increase was due to net income retained. The year-over-year increase was due to net income retained and an increase in unrealized gains in the securities and derivatives portfolios, offset partially by stock repurchases made under the Company’s stock repurchase program. The Company did not repurchase any shares of its common stock during the second quarter of 2021. Tangible book value per share, a non-GAAP financial measure, was $10.22 as of June 30, 2021, an increase of 4.3% from $9.80 as of March 31, 2021, and an increase of 16.2% from $8.80 as of June 30, 2020. Subsequent to the end of the quarter, on July 8, 2021 the Company issued $30.0 million of 3.25% Fixed-to-Floating Rate Subordinated Notes due 2031 in a private placement transaction. These notes are callable starting on July 15, 2026 and qualify for tier 2 capital treatment at the holding company level. The Company intends to use the net proceeds of the private placement for general corporate purposes, including support for organic growth plans, support for bank level capital ratios and possible redemption or repurchase of currently outstanding indebtedness. Asset Quality Annualized net charge-offs (recoveries) as a percent of average loans for the second quarter of 2021 were 0.00%, compared to (0.01)% for the first quarter of 2021, and (0.01)% for the second quarter of 2020. At June 30, 2021, the Company’s nonperforming assets, which include nonaccrual loans, loans past due 90 days and still accruing, and foreclosed assets, were $761,000, or 0.02% of total assets, as compared to $770,000, or 0.03% of total assets at March 31, 2021, and $602,000 or 0.02% of total assets at June 30, 2020. The Company has increased oversight and analysis of all segments of the loan portfolio in response to the COVID-19 pandemic, especially in vulnerable industries such as hospitality and restaurants, to proactively monitor evolving credit risk. Loans that have potential weaknesses that warrant a watchlist risk rating at June 30, 2021 totaled $56.7 million, compared to $58.3 million at March 31, 2021. As the COVID-19 pandemic continues to evolve, the length and extent of the economic uncertainty may result in further watchlist or adverse classifications in the loan portfolio. Loans that warranted a substandard risk rating at June 30, 2021 totaled $7.2 million, compared to $6.7 million at March 31, 2021. The following table presents a summary of asset quality measurements at the dates indicated: As of and for the Three Months Ended June 30, March 31 December 31, September 30, June 30, (dollars in thousands) 2021 2021 2020 2020 2020 Selected Asset Quality Data Loans 30-89 Days Past Due $ — $ — $ 13 $ 458 $ 153 Loans 30-89 Days Past Due to Total Loans 0.00 % 0.00 % 0.00 % 0.02 % 0.01 % Nonperforming Loans $ 761 $ 770 $ 775 $ 433 $ 602 Nonperforming Loans to Total Loans 0.03 % 0.03 % 0.03 % 0.02 % 0.03 % Foreclosed Assets $ — $ — $ — $ — $ — Nonaccrual Loans to Total Loans 0.03 % 0.03 % 0.03 % 0.02 % 0.03 % Nonaccrual Loans and Loans Past Due 90 Days and Still Accruing to Total Loans 0.03 0.03 0.03 0.02 0.03 Nonperforming Assets (1) $ 761 $ 770 $ 775 $ 433 $ 602 Nonperforming Assets to Total Assets (1) 0.02 % 0.03 % 0.03 % 0.02 % 0.02 % Allowance for Loan Losses to Total Loans 1.45 1.48 1.50 1.39 1.26 Allowance for Loan Losses to Total Loans, Excluding PPP Loans 1.51 1.59 1.59 1.51 1.37 Allowance for Loans Losses to Nonperforming Loans 4,939.68 4,673.64 4,495.61 7,247.34 4,590.20 Net Loan Charge-Offs (Recoveries) (Annualized) to Average Loans 0.00 (0.01 ) 0.08 0.00 (0.01 ) _________________________________ (1) Nonperforming assets are defined as nonaccrual loans plus loans 90 days past due plus foreclosed assets. The Company developed programs for clients who experienced business and personal disruptions due to the COVID-19 pandemic by providing interest-only modifications, loan payment deferrals, and extended amortization modifications. In accordance with interagency regulatory guidance and the CARES Act, qualifying loans modified in response to the COVID-19 pandemic are not considered troubled debt restructurings. The Company had 19 modified loans totaling $33.9 million outstanding as of June 30, 2021, representing 1.4% of the total loan portfolio, excluding PPP loans. The following table presents a rollforward of loan modification activity, by modification type, from March 31, 2021 to June 30, 2021: (dollars in thousands) Interest-Only Payment Deferral Extended Amortization Total Principal Balance - March 31, 2021 $ 31,663 $ 618 $ 4,802 $ 37,083 Modification Expired (4,139 ) (618 ) — (4,757 ) Additional Modification Granted 1,173 — — 1,173 New Modifications 468 — — 468 Net Principal Advances (Payments) (6 ) — (24 ) (30 ) Principal Balance - June 30, 2021 $ 29,159 $ — $ 4,778 $ 33,937 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 high-net-worth individuals. By pairing a range of deposit, lending and business services solutions with a responsive service model, Bridgewater has seen continuous growth and profitability. With total assets of $3.2 billion and seven branches as of June 30, 2021, 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: the negative effects of the COVID-19 pandemic, including its effects on the economic environment, our clients and our operations, as well as any changes to federal, state or local government laws, regulations or orders in connection with the pandemic; 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; new or revised accounting standards, including as a result of the future implementation of the Current Expected Credit Loss standard; the concentration of large loans to certain borrowers; the concentration of large deposits from certain clients; 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; developments and uncertainty related to the future use and availability of some reference rates, such as the London Interbank Offered Rate, as well as other alternative reference rates; 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; severe weather, natural disasters, wide spread disease or pandemics (including the COVID-19 pandemic), acts of war or terrorism or other adverse external events; potential impairment to the goodwill we recorded in connection with our past acquisition; changes to U.S. tax laws, regulations and guidance; 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. 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. Bridgewater Bancshares, Inc. and Subsidiaries Consolidated Balance Sheets (dollars in thousands, except share data) June 30, December 31, June 30, 2021 2020 2020 (Unaudited) (Unaudited) ASSETS Cash and Cash Equivalents $ 92,197 $ 160,675 $ 178,428 Bank-Owned Certificates of Deposit 2,368 2,860 2,895 Securities Available for Sale, at Fair Value 402,786 390,629 326,295 Loans, Net of Allowance for Loan Losses of $37,591 at June 30, 2021 (unaudited), $34,841 at December 31, 2020 and $27,633 at June 30, 2020 (unaudited) 2,545,145 2,282,436 2,155,858 Federal Home Loan Bank (FHLB) Stock, at Cost 5,832 5,027 8,617 Premises and Equipment, Net 50,177 50,987 43,062 Accrued Interest 8,728 9,172 8,267 Goodwill 2,626 2,626 2,626 Other Intangible Assets, Net 574 670 765 Other Assets 52,179 22,263 27,650 Total Assets $ 3,162,612 $ 2,927,345 $ 2,754,463 LIABILITIES AND EQUITY LIABILITIES Deposits: Noninterest Bearing $ 758,023 $ 671,903 $ 648,869 Interest Bearing 1,962,883 1,829,733 1,593,182 Total Deposits 2,720,906 2,501,636 2,242,051 Notes Payable — 11,000 12,000 FHLB Advances 57,500 57,500 147,500 Subordinated Debentures, Net of Issuance Costs 73,913 73,739 73,658 Accrued Interest Payable 2,654 1,615 1,953 Other Liabilities 16,809 16,450 20,111 Total Liabilities 2,871,782 2,661,940 2,497,273 SHAREHOLDERS' EQUITY Preferred Stock- $0.01 par value Authorized 10,000,000; None Issued and Outstanding at June 30, 2021 (unaudited), December 31, 2020 and June 30, 2020 (unaudited) — — — Common Stock- $0.01 par value Common Stock - Authorized 75,000,000; Issued and Outstanding 28,162,777 at June 30, 2021 (unaudited), 28,143,493 at December 31, 2020 and 28,837,560 at June 30, 2020 (unaudited) 282 281 288 Additional Paid-In Capital 104,811 103,714 110,906 Retained Earnings 176,495 154,831 142,678 Accumulated Other Comprehensive Income 9,242 6,579 3,318 Total Shareholders' Equity 290,830 265,405 257,190 Total Liabilities and Equity $ 3,162,612 $ 2,927,345 $ 2,754,463 Bridgewater Bancshares, Inc. and Subsidiaries Consolidated Statements of Income (dollars in thousands, except per share data) Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) INTEREST INCOME Loans, Including Fees $ 28,748 $ 27,908 $ 25,913 $ 56,656 $ 51,026 Investment Securities 2,312 2,420 2,091 4,732 4,287 Other 87 112 162 199 321 Total Interest Income 31,147 30,440 28,166 61,587 55,634 INTEREST EXPENSE Deposits 3,513 3,671 5,170 7,184 10,894 Notes Payable — 61 111 61 226 FHLB Advances 228 228 1,064 456 2,091 Subordinated Debentures 1,112 1,085 479 2,197 872 Federal Funds Purchased 6 — — 6 107 Total Interest Expense 4,859 5,045 6,824 9,904 14,190 NET INTEREST INCOME 26,288 25,395 21,342 51,683 41,444 Provision for Loan Losses 1,600 1,100 3,000 2,700 5,100 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 24,688 24,295 18,342 48,983 36,344 NONINTEREST INCOME Customer Service Fees 231 234 135 465 375 Net Gain on Sales of Available for Sale Securities 702 — 1,361 702 1,364 Other Income 670 774 481 1,444 1,957 Total Noninterest Income 1,603 1,008 1,977 2,611 3,696 NONINTEREST EXPENSE Salaries and Employee Benefits 7,512 7,102 6,348 14,614 12,802 Occupancy and Equipment 980 1,055 672 2,035 1,385 Other Expense 2,985 2,766 3,691 5,751 6,270 Total Noninterest Expense 11,477 10,923 10,711 22,400 20,457 INCOME BEFORE INCOME TAXES 14,814 14,380 9,608 29,194 19,583 Provision for Income Taxes 3,821 3,709 2,010 7,530 4,542 NET INCOME $ 10,993 $ 10,671 $ 7,598 $ 21,664 $ 15,041 EARNINGS PER SHARE Basic $ 0.39 $ 0.38 $ 0.26 $ 0.77 $ 0.52 Diluted 0.38 0.37 0.26 0.75 0.51 Dividends Paid Per Share — — — — — Bridgewater Bancshares, Inc. and Subsidiaries Analysis of Average Balances, Yields and Rates (year-to-date) (dollars in thousands, except per share data) (Unaudited) For the Six Months Ended June 30, 2021 June 30, 2020 Average Interest Yield/ Average Interest Yield/ Balance & Fees Rate Balance & Fees Rate (dollars in thousands) Interest Earning Assets: Cash Investments $ 96,724 $ 67 0.14 % $ 69,267 $ 96 0.28 % Investment Securities: Taxable Investment Securities 307,898 3,371 2.21 195,873 2,691 2.76 Tax-Exempt Investment Securities (1) 78,985 1,723 4.40 93,260 2,020 4.36 Total Investment Securities 386,883 5,094 2.66 289,133 4,711 3.28 Paycheck Protection Program Loans (2) 149,098 3,631 4.91 70,037 873 2.51 Loans (1)(2) 2,313,295 53,085 4.63 1,983,641 50,220 5.09 Total Loans 2,462,393 56,716 4.64 2,053,678 51,093 5.00 Federal Home Loan Bank Stock 5,636 132 4.74 10,370 225 4.37 Total Interest Earning Assets 2,951,636 62,009 4.24 % 2,422,448 56,125 4.66 % Noninterest Earning Assets 57,228 47,208 Total Assets $ 3,008,864 $ 2,469,656 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 392,732 $ 942 0.48 % $ 259,704 $ 808 0.63 % Savings and Money Market Deposits 744,480 1,949 0.53 527,445 3,232 1.23 Time Deposits 338,497 2,341 1.39 382,256 4,299 2.26 Brokered Deposits 391,167 1,952 1.01 269,000 2,555 1.91 Total Interest Bearing Deposits 1,866,876 7,184 0.78 1,438,405 10,894 1.52 Federal Funds Purchased 4,993 6 0.24 12,422 107 1.74 Notes Payable 3,343 61 3.66 12,253 226 3.71 FHLB Advances 57,500 456 1.60 183,099 2,091 2.30 Subordinated Debentures 73,819 2,197 6.00 27,986 872 6.27 Total Interest Bearing Liabilities 2,006,531 9,904 1.00 % 1,674,165 14,190 1.70 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 704,391 523,828 Other Noninterest Bearing Liabilities 18,384 18,708 Total Noninterest Bearing Liabilities 722,775 542,536 Shareholders' Equity 279,558 252,955 Total Liabilities and Shareholders' Equity $ 3,008,864 $ 2,469,656 Net Interest Income / Interest Rate Spread 52,105 3.24 % 41,935 2.96 % Net Interest Margin (3) 3.56 % 3.48 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities and Loans (422 ) (491 ) Net Interest Income $ 51,683 $ 41,444 _________________________________ (1) Interest income and average rates for tax-exempt investment securities and loans are presented on a tax-equivalent basis, assuming a statutory federal income tax rate of 21% (2) Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs. (3) Net interest margin includes the tax equivalent adjustment and represents the annualized results of: (i) the difference between interest income on interest earning assets and the interest expense on interest bearing liabilities, divided by (ii) average interest earning assets for the period. Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended For the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020 Pre-Provision Net Revenue Noninterest Income $ 1,603 $ 1,008 $ 1,977 $ 2,611 $ 3,696 Less: Gain on sales of Securities (702 ) — (1,361 ) (702 ) (1,364 ) Total Operating Noninterest Income 901 1,008 616 1,909 2,332 Plus: Net Interest income 26,288 25,395 21,342 51,683 41,444 Net Operating Revenue $ 27,189 $ 26,403 $ 21,958 $ 53,592 $ 43,776 Noninterest Expense $ 11,477 $ 10,923 $ 10,711 $ 22,400 $ 20,457 Less: Amortization of Tax Credit Investments (140 ) (118 ) (362 ) (258 ) (447 ) Less: FHLB Advance Prepayment Fees — — (1,430 ) — (1,430 ) Total Operating Noninterest Expense $ 11,337 $ 10,805 $ 8,919 $ 22,142 $ 18,580 Pre-Provision Net Revenue $ 15,852 $ 15,598 $ 13,039 $ 31,450 $ 25,196 Plus: Non-Operating Revenue Adjustments 702 — 1,361 702 1,364 Less: Provision for Loan Losses 1,600 1,100 3,000 2,700 5,100 Non-Operating Expense Adjustments 140 118 1,792 258 1,877 Provision for Income Taxes 3,821 3,709 2,010 7,530 4,542 Net Income $ 10,993 $ 10,671 $ 7,598 $ 21,664 $ 15,041 Average Assets $ 3,076,712 $ 2,940,262 $ 2,622,272 $ 3,008,864 $ 2,469,656 Pre-Provision Net Revenue Return on Average Assets 2.07 % 2.15 % 2.00 % 2.11 % 2.05 % As of and for the Three Months Ended As of and for the Six Months Ended June 30, March 31 June 30, June 30, June 30, 2021 2021 2020 2021 2020 Core Net Interest Margin Net Interest Income (Tax-Equivalent Basis) $ 26,495 $ 25,609 $ 21,581 $ 52,105 $ 41,935 Less: Loan Fees (1,023 ) (1,202 ) (1,264 ) (2,225 ) (2,571 ) Less: PPP Interest and Fees (1,767 ) (1,864 ) (873 ) (3,631 ) (873 ) Core Net Interest Income $ 23,705 $ 22,543 $ 19,444 $ 46,249 $ 38,491 Average Interest Earning Assets 3,019,437 2,883,084 2,567,292 2,951,636 2,422,448 Less: Average PPP Loans (149,312 ) (148,881 ) (139,235 ) (149,098 ) (70,037 ) Core Average Interest Earning Assets $ 2,870,125 $ 2,734,203 $ 2,428,057 $ 2,802,538 $ 2,352,411 Core Net Interest Margin 3.31 % 3.34 % 3.22 % 3.33 % 3.29 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended For the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020 Efficiency Ratio Noninterest Expense $ 11,477 $ 10,923 $ 10,711 $ 22,400 $ 20,457 Less: Amortization of Intangible Assets (47 ) (48 ) (47 ) (95 ) (95 ) Adjusted Noninterest Expense $ 11,430 $ 10,875 $ 10,664 $ 22,305 $ 20,362 Net Interest Income 26,288 25,395 21,342 51,683 41,444 Noninterest Income 1,603 1,008 1,977 2,611 3,696 Less: Gain on Sales of Securities (702 ) — (1,361 ) (702 ) (1,364 ) Adjusted Operating Revenue $ 27,189 $ 26,403 $ 21,958 $ 53,592 $ 43,776 Efficiency Ratio 42.0 % 41.2 % 48.6 % 41.6 % 46.5 % Adjusted Efficiency Ratio Noninterest Expense $ 11,477 $ 10,923 $ 10,711 $ 22,400 $ 20,457 Less: Amortization of Tax Credit Investments (140 ) (118 ) (362 ) (258 ) (447 ) Less: FHLB Advance Prepayment Fees — — (1,430 ) — (1,430 ) Less: Amortization of Intangible Assets (47 ) (48 ) (47 ) (95 ) (95 ) Adjusted Noninterest Expense $ 11,290 $ 10,757 $ 8,872 $ 22,047 $ 18,485 Net Interest Income 26,288 25,395 21,342 51,683 41,444 Noninterest Income 1,603 1,008 1,977 2,611 3,696 Less: Gain on Sales of Securities (702 ) — (1,361 ) (702 ) (1,364 ) Adjusted Operating Revenue $ 27,189 $ 26,403 $ 21,958 $ 53,592 $ 43,776 Adjusted Efficiency Ratio 41.5 % 40.7 % 40.4 % 41.1 % 42.2 % For the Three Months Ended For the Six Months Ended June 30, March 31 June 30, June 30, June 30, 2021 2021 2020 2021 2020 Adjusted Noninterest Expense to Average Assets Noninterest Expense $ 11,477 $ 10,923 $ 10,711 $ 22,400 $ 20,457 Less: Amortization of Tax Credit Investments (140 ) (118 ) (362 ) (258 ) (447 ) Less: FHLB Advance Prepayment Fees — — (1,430 ) — (1,430 ) Adjusted Noninterest Expense $ 11,337 $ 10,805 $ 8,919 $ 22,142 $ 18,580 Average Assets $ 3,076,712 $ 2,940,262 $ 2,622,272 $ 3,008,864 $ 2,469,656 Adjusted Noninterest Expense to Average Assets 1.48 % 1.49 % 1.37 % 1.48 % 1.51 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) As of and for the Three Months Ended As of and for the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020 Tangible Common Equity and Tangible Common Equity/Tangible Assets Common Equity $ 290,830 $ 279,171 $ 257,190 Less: Intangible Assets (3,200 ) (3,248 ) (3,391 ) Tangible Common Equity $ 287,630 $ 275,923 $ 253,799 Total Assets $ 3,162,612 $ 3,072,359 $ 2,754,463 Less: Intangible Assets (3,200 ) (3,248 ) (3,391 ) Tangible Assets $ 3,159,412 $ 3,069,111 $ 2,751,072 Tangible Common Equity/Tangible Assets 9.10 % 8.99 % 9.23 % Tangible Book Value Per Share Book Value Per Common Share $ 10.33 $ 9.92 $ 8.92 Less: Effects of Intangible Assets (0.11 ) (0.12 ) (0.12 ) Tangible Book Value Per Common Share $ 10.22 $ 9.80 $ 8.80 Return on Average Tangible Common Equity Net Income $ 10,993 $ 10,671 $ 7,598 $ 21,664 $ 15,041 Average Common Equity $ 286,311 $ 272,729 $ 255,109 $ 279,558 $ 252,955 Less: Effects of Average Intangible Assets (3,228 ) (3,276 ) (3,419 ) (3,251 ) (3,442 ) Average Tangible Common Equity $ 283,083 $ 269,453 $ 251,690 $ 276,307 $ 249,513 Return on Average Tangible Common Equity 15.58 % 16.06 % 12.14 % 15.81 % 12.12 % Three Months Ended June 30, March 31, December 31, September 30, June 30, 2021 2021 2020 2020 2020 Tangible Common Equity Common Equity $ 290,830 $ 279,171 $ 265,405 $ 265,432 $ 257,190 Less: Intangible Assets (3,200 ) (3,248 ) (3,296 ) (3,344 ) (3,391 ) Tangible Common Equity $ 287,630 $ 275,923 $ 262,109 $ 262,088 $ 253,799 View source version on businesswire.com: https://www.businesswire.com/news/home/20210729005241/en/