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 Fourth Quarter 2021 Net Income of $12.5 Million, $0.39 Diluted Earnings Per Common Share By: Bridgewater Bancshares, Inc. via Business Wire January 27, 2022 at 07:05 AM EST Bridgewater Bancshares, Inc. (Nasdaq: BWB) (the Company), the parent company of Bridgewater Bank (the Bank), today announced net income of $12.5 million for the fourth quarter of 2021, an 8.7% increase over net income of $11.5 million for the third quarter of 2021, and a 151.3% increase over net income of $5.0 million for the fourth quarter of 2020. Net income per diluted common share for the fourth quarter of 2021 was $0.39, a 1.2% decrease compared to $0.40 per diluted common share for the third quarter of 2021, and a 126.1% increase compared to $0.17 per diluted common share for the same period in 2020. “Bridgewater reported a fourth consecutive quarter of record net income driven by the continuation of many of the same trends and momentum we created throughout 2021,” said Chairman, Chief Executive Officer, and President, Jerry Baack. “During the quarter, we continued to generate strong loan production and gather high-quality deposits across the Twin Cities market, leading to robust balance sheet growth. This level of consistent growth in today’s environment, along with a business model operating with a low 40% adjusted efficiency ratio, stable net interest margin and strong asset quality, remain key differentiators for us. As we look ahead to 2022, we expect to continue to leverage the ongoing M&A-related market disruption and our strengthening brand to drive additional balance sheet and revenue growth; make proactive investments in business scalability, automation and back-office functions; and maintain our highly efficient operating strategy. With a hard-working team of talented professionals supporting our clients every day and a strong capital and liquidity position, we are poised to build on our momentum into 2022 and beyond.” The Company today also announced that its Board of Directors declared a quarterly cash dividend on its 5.875% Non-Cumulative Perpetual Preferred Stock, Series A ("Series A Preferred Stock"). The quarterly cash dividend of $36.72 per share, equivalent to $0.3672 per depositary share, each representing a 1/100th interest in a share of the Series A Preferred Stock (Nasdaq: BWBBP), is payable on March 1, 2022 to shareholders of record of the Series A Preferred Stock at the close of business on February 15, 2022. Fourth Quarter 2021 Financial Results Diluted Nonperforming Adjusted ROA PPNR ROA (1) ROE earnings per share assets to total assets efficiency ratio (1) 1.46 % 2.11 % 13.27 % $ 0.39 0.02 % 40.3 % _________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. Fourth Quarter 2021 Highlights Diluted earnings per common share were $0.39 for the fourth quarter of 2021, compared to $0.40 per common share for the third quarter of 2021. Payment of the Company’s first quarterly preferred stock dividend negatively impacted diluted earnings per common share by $0.04 in the fourth quarter of 2021, compared to no preferred stock dividend payment in the third quarter of 2021. Annualized return on average assets (ROA) and annualized return on average shareholders’ equity (ROE) for the fourth quarter of 2021 were 1.46% and 13.27%, compared to ROA and ROE of 1.37% and 13.81%, respectively, for the third quarter of 2021. Annualized return on average tangible common equity, a non-GAAP financial measure, was 14.78% for the fourth quarter of 2021, compared to 15.47% for the third quarter of 2021. Pre-provision net revenue (PPNR), a non-GAAP financial measure, was $18.1 million for the fourth quarter of 2021, compared to $17.5 million for the third quarter of 2021. PPNR ROA, a non-GAAP financial measure, was 2.11% for the fourth quarter of 2021, compared to 2.09% for the third quarter of 2021. Gross loans increased $107.5 million in the fourth quarter of 2021, or 15.7% annualized, compared to the third quarter of 2021. Gross loans, excluding Paycheck Protection Program (PPP) loans, increased $135.5 million in the fourth quarter of 2021, or 20.2% annualized, compared to the third quarter of 2021. Deposits increased $92.1 million in the fourth quarter of 2021, or 12.8% annualized, compared to the third quarter of 2021. Net interest margin (on a fully tax-equivalent basis) was 3.51% for the fourth quarter of 2021, compared to 3.54% in the third quarter of 2021. 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, expanded 3 basis points from 3.22% in the third quarter of 2021 to 3.25% in the fourth 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 40.3% for the fourth quarter of 2021, compared to 41.5% for the third quarter of 2021. A loan loss provision of $1.2 million was recorded in the fourth quarter of 2021 to support strong organic loan growth. The allowance for loan losses to total loans was 1.42% at December 31, 2021, compared to 1.43% at September 30, 2021. The allowance for loan losses to total loans, excluding PPP loans, was 1.43% at December 31, 2021, compared to 1.46% at September 30, 2021. Annualized net loan charge-offs as a percentage of average loans were 0.00% for both the fourth quarter of 2021, and the third quarter of 2021. Tangible book value per share, a non-GAAP financial measure, increased $0.36, or 13.6% annualized, to $10.98 at December 31, 2021, compared to $10.62 at September 30, 2021. Annual 2021 Highlights Diluted earnings per common share for the year ended December 31, 2021 were $1.54, a 64.8% increase, compared to $0.93 for the year ended December 31, 2020. PPNR, a non-GAAP financial measure, was $67.1 million for the year ended December 31, 2021, an increase of 22.7%, compared to $54.7 million for the year ended December 31, 2020. PPNR ROA, a non-GAAP financial measure, was 2.10% for the year ended December 31, 2021, compared to 2.09% for the year ended December 31, 2020. Gross loans increased $493.0 million at December 31, 2021, or 21.2%, compared to December 31, 2020. Excluding PPP loans, gross loans increased 27.7%, at December 31, 2021, compared to December 31, 2020. Deposits increased $444.6 million at December 31, 2021, or 17.8%, compared to December 31, 2020. Net interest margin (on a fully tax-equivalent basis) was 3.54% for the year ended December 31, 2021, compared to 3.46% for the year ended December 31, 2020. Core net interest margin (on a fully tax-equivalent basis), a non-GAAP financial measure, for the year ended December 31, 2021 was 3.28%, compared to 3.25% for the year ended December 31, 2020. The adjusted efficiency ratio, a non-GAAP financial measure, was 41.0% for the year ended December 31, 2021, compared to 40.5% for the year ended December 31, 2020. Net loan charge-offs as a percentage of average loans were 0.00% for the year ended December 31, 2021, compared to 0.02% for the year ended December 31, 2020. The ratio of nonperforming assets to total assets was 0.02% at December 31, 2021, compared to 0.03% at December 31, 2020. Tangible book value per share, a non-GAAP financial measure, increased 17.9%, or $1.66, to $10.98 at December 31, 2021, compared to $9.31 at December 31, 2020. Key Financial Measures As of and for the Three Months Ended As of and for the Year Ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 Per Common Share Data Basic Earnings Per Share $ 0.41 $ 0.41 $ 0.18 $ 1.59 $ 0.95 Diluted Earnings Per Share 0.39 0.40 0.17 1.54 0.93 Adjusted Diluted Earnings Per Share (1) 0.39 0.41 0.32 1.55 1.12 Book Value Per Share 11.09 10.73 9.43 Tangible Book Value Per Share (1) 10.98 10.62 9.31 Basic Weighted Average Shares Outstanding 28,004,334 28,047,280 28,179,768 28,027,454 28,582,064 Diluted Weighted Average Shares Outstanding 29,038,785 29,110,547 28,823,384 28,968,286 29,170,220 Shares Outstanding at Period End 28,206,566 28,066,822 28,143,493 Selected Performance Ratios Return on Average Assets (Annualized) 1.46 % 1.37 % 0.70 % 1.43 % 1.04 % Pre-Provision Net Revenue Return on Average Assets (Annualized) (1) 2.11 2.09 2.30 2.10 2.09 Return on Average Shareholders' Equity (Annualized) 13.27 13.81 7.45 14.45 10.51 Return on Average Tangible Common Equity (Annualized) (1) 14.78 15.47 7.55 15.45 10.65 Yield on Interest Earning Assets 4.06 4.14 4.46 4.16 4.51 Yield on Total Loans, Gross 4.49 4.65 4.89 4.60 4.90 Cost of Interest Bearing Liabilities 0.86 0.88 1.24 0.93 1.53 Cost of Total Deposits 0.45 0.48 0.69 0.51 0.93 Net Interest Margin (2) 3.51 3.54 3.61 3.54 3.46 Core Net Interest Margin (1)(2) 3.25 3.22 3.29 3.28 3.25 Efficiency Ratio (1) 40.8 43.9 59.0 42.0 49.0 Adjusted Efficiency Ratio (1) 40.3 41.5 36.6 41.0 40.5 Noninterest Expense to Average Assets (Annualized) 1.45 1.58 2.16 1.51 1.73 Adjusted Noninterest Expense to Average Assets (Annualized) (1) 1.43 1.49 1.34 1.47 1.44 Loan to Deposit Ratio 95.7 95.0 93.0 Core Deposits to Total Deposits (3) 85.4 83.3 78.1 Tangible Common Equity to Tangible Assets (1) 8.91 8.81 8.96 Capital Ratios (Bank Only) (4) Tier 1 Leverage Ratio 11.09 % 10.96 % 10.89 % Common Equity Tier 1 Risk-based Capital Ratio 11.69 11.88 12.12 Tier 1 Risk-based Capital Ratio 11.69 11.88 12.12 Total Risk-based Capital Ratio 12.94 13.13 13.37 Capital Ratios (Consolidated) (4) Tier 1 Leverage Ratio 10.82 % 10.70 % 9.28 % Common Equity Tier 1 Risk-based Capital Ratio 9.36 9.47 10.35 Tier 1 Risk-based Capital Ratio 11.43 11.65 10.35 Total Risk-based Capital Ratio 15.55 15.93 14.58 _________________________________ (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 December 31, September 30, June 30, March 31, December 31, (dollars in thousands) 2021 2021 2021 2021 2020 Selected Balance Sheet Data Total Assets $ 3,477,659 $ 3,389,125 $ 3,162,612 $ 3,072,359 $ 2,927,345 Total Loans, Gross 2,819,472 2,712,012 2,594,186 2,426,123 2,326,428 Allowance for Loan Losses 40,020 38,901 37,591 35,987 34,841 Goodwill and Other Intangibles 3,105 3,153 3,200 3,248 3,296 Deposits 2,946,237 2,854,157 2,720,906 2,638,654 2,501,636 Tangible Common Equity (1) 309,653 298,135 287,630 275,923 262,109 Total Shareholders' Equity 379,272 367,803 290,830 279,171 265,405 Average Total Assets - Quarter-to-Date 3,403,270 3,332,301 3,076,712 2,940,262 2,816,032 Average Shareholders' Equity - Quarter-to-Date 374,035 330,604 286,311 272,729 265,716 _________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. For the Three Months Ended For the Year Ended December 31, September 30, December 31, December 31, December 31, (dollars in thousands) 2021 2021 2020 2021 2020 Selected Income Statement Data Interest Income $ 33,775 $ 33,517 $ 30,699 $ 128,879 $ 114,826 Interest Expense 4,622 4,844 5,858 19,370 26,862 Net Interest Income 29,153 28,673 24,841 109,509 87,964 Provision for Loan Losses 1,150 1,300 3,900 5,150 12,750 Net Interest Income after Provision for Loan Losses 28,003 27,373 20,941 104,359 75,214 Noninterest Income 1,288 1,410 986 5,309 5,839 Noninterest Expense 12,459 13,236 15,258 48,095 45,387 Income Before Income Taxes 16,832 15,547 6,669 61,573 35,666 Provision for Income Taxes 4,318 4,038 1,690 15,886 8,472 Net Income 12,514 11,509 4,979 45,687 27,194 Preferred Stock Dividends (1,171 ) — — (1,171 ) — Net Income Available to Common Shareholders $ 11,343 $ 11,509 $ 4,979 $ 44,516 $ 27,194 Income Statement Net Interest Income Net interest income was $29.2 million for the fourth quarter of 2021, an increase of $480,000, or 1.7%, from $28.7 million in the third quarter of 2021, and an increase of $4.3 million, or 17.4%, from $24.8 million in the fourth 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 and lower rates paid on deposits, offset partially by declining yields on loans. Average interest earning assets were $3.32 billion for the fourth quarter of 2021, an increase of $86.3 million, or 2.7%, from $3.23 billion for the third quarter of 2021, and an increase of $561.1 million, or 20.3%, from $2.76 billion for the fourth quarter of 2020. The linked-quarter increase in average interest earning assets was primarily due to continued strong organic growth in the loan portfolio, offset partially by the payoff of PPP loans and the reduction of cash balances. The year-over-year increase in average interest earning assets was primarily due to increased cash balances, continued purchases of investment securities, and strong organic growth in the loan portfolio, offset partially by the payoff of PPP loans. Net interest margin (on a fully tax-equivalent basis) for the fourth quarter of 2021 was 3.51%, a 3 basis point decrease from 3.54% in the third quarter of 2021, and a 10 basis point decrease from 3.61% in the fourth 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 fourth quarter of 2021 was 3.25%, a 3 basis point increase from 3.22% in the third quarter of 2021, and a 4 basis point decline from 3.29% in the fourth quarter of 2020. As the PPP loan portfolio pays down, the recognition of fees associated with the originations has benefited net interest margin for each of the past four quarters. The SBA has been forgiving PPP loans, which has accelerated the recognition of PPP fees starting in the fourth quarter of 2020 and continuing through the fourth quarter of 2021. The Company recognized $958,000 of PPP origination fees during the fourth quarter of 2021, compared to $1.6 million during the third quarter of 2021. The elevated fee recognition is illustrated in the 10.51% PPP loan yield for the fourth quarter of 2021, compared to 9.15% for the third quarter of 2021. Remaining PPP origination fees to be recognized as of December 31, 2021 were $898,000. The following table summarizes PPP loan originations and net origination fees as of December 31, 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 17 $ 1,109 $ 5,706 $ 5,698 Round Two PPP Loans 651 78,386 136 25,053 3,544 2,654 Totals 1,851 $ 259,986 153 $ 26,162 $ 9,250 $ 8,352 Interest income was $33.8 million for the fourth quarter of 2021, an increase of $258,000, or 0.8%, from $33.5 million in the third quarter of 2021, and an increase of $3.1 million, or 10.0%, from $30.7 million in the fourth quarter of 2020. The yield on interest earning assets (on a fully tax-equivalent basis) was 4.06% in the fourth quarter of 2021, compared to 4.14% in the third quarter of 2021, and 4.46% in the fourth 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 core loan yield, as well as lower PPP origination fees recognized during the period. The year-over-year decline in the yield on interest earning assets was primarily due to excess cash balances and 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 4.41% in the fourth quarter of 2021, which was 10 basis points lower than 4.51% in the third quarter of 2021, and 46 basis points lower than 4.87% in the fourth 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 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 Interest 4.20 % 4.28 % 4.37 % 4.50 % 4.59 % Fees 0.21 0.23 0.17 0.22 0.28 Yield on Loans, Excluding PPP Loans 4.41 % 4.51 % 4.54 % 4.72 % 4.87 % Interest expense was $4.6 million for the fourth quarter of 2021, a decrease of $222,000, or 4.6%, from $4.8 million in the third quarter of 2021, and a decrease of $1.2 million, or 21.1%, from $5.9 million in the fourth quarter of 2020. The cost of interest bearing liabilities declined 2 basis points on a linked-quarter basis from 0.88% in the third quarter of 2021 to 0.86% in the fourth quarter of 2021, primarily due to lower rates paid on deposits. On a year-over-year basis, the cost of interest bearing liabilities decreased 38 basis points from 1.24% in the fourth quarter of 2020 to 0.86% in the fourth 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 $3.2 million for the fourth quarter of 2021, a decrease of $176,000, or 5.2%, from $3.4 million in the third quarter of 2021, and a decrease of $838,000, or 20.5%, from $4.1 million in the fourth quarter of 2020. The cost of total deposits declined 3 basis points on a linked-quarter basis from 0.48% in the third quarter of 2021, and declined 24 basis points on a year-over-year basis from 0.69% in the fourth quarter of 2020, to 0.45% in the fourth quarter of 2021, primarily due to deposit rate cuts consistent with a lower rate environment and the continued downward repricing of time deposits. A summary of the Company’s average balances, interest yields and rates, and net interest margin for the three months ended December 31, 2021, September 30, 2021, and December 31, 2020 is as follows: For the Three Months Ended December 31, 2021 September 30, 2021 December 31, 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 $ 146,744 $ 65 0.18 % $ 187,405 $ 67 0.14 % $ 79,896 $ 32 0.16 % Investment Securities: Taxable Investment Securities 341,325 1,893 2.20 314,367 1,751 2.21 290,093 1,632 2.24 Tax-Exempt Investment Securities (1) 71,602 782 4.33 71,801 737 4.07 81,370 888 4.34 Total Investment Securities 412,927 2,675 2.57 386,168 2,488 2.56 371,463 2,520 2.70 Paycheck Protection Program Loans (2) 39,900 1,057 10.51 76,006 1,753 9.15 165,099 2,097 5.05 Loans (1)(2) 2,715,722 30,154 4.41 2,579,021 29,348 4.51 2,136,229 26,168 4.87 Total Loans 2,755,622 31,211 4.49 2,655,027 31,101 4.65 2,301,328 28,265 4.89 Federal Home Loan Bank Stock 5,310 59 4.39 5,701 68 4.65 6,856 92 5.35 Total Interest Earning Assets 3,320,603 34,010 4.06 % 3,234,301 33,724 4.14 % 2,759,543 30,909 4.46 % Noninterest Earning Assets 82,667 98,000 56,489 Total Assets $ 3,403,270 $ 3,332,301 $ 2,816,032 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 499,475 $ 548 0.43 % $ 479,580 $ 562 0.47 % $ 353,806 $ 420 0.47 % Savings and Money Market Deposits 803,848 876 0.43 801,354 904 0.45 538,030 1,003 0.74 Time Deposits 299,823 830 1.10 318,222 928 1.16 362,469 1,607 1.76 Brokered Deposits 404,438 987 0.97 440,167 1,023 0.92 433,037 1,049 0.96 Total Interest Bearing Deposits 2,007,584 3,241 0.64 2,039,323 3,417 0.66 1,687,342 4,079 0.96 Federal Funds Purchased 10 — 0.67 — — — 4,072 4 0.33 Notes Payable — — — — — — 11,000 105 3.77 FHLB Advances 44,185 162 1.46 54,130 213 1.56 99,196 551 2.21 Subordinated Debentures 92,189 1,219 5.25 91,337 1,214 5.27 73,696 1,119 6.04 Total Interest Bearing Liabilities 2,143,968 4,622 0.86 % 2,184,790 4,844 0.88 % 1,875,306 5,858 1.24 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 861,473 784,148 654,299 Other Noninterest Bearing Liabilities 23,794 32,759 20,711 Total Noninterest Bearing Liabilities 885,267 816,907 675,010 Shareholders' Equity 374,035 330,604 265,716 Total Liabilities and Shareholders' Equity $ 3,403,270 $ 3,332,301 $ 2,816,032 Net Interest Income / Interest Rate Spread 29,388 3.20 % 28,880 3.26 % 25,051 3.22 % Net Interest Margin (3) 3.51 % 3.54 % 3.61 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities and Loans (235 ) (207 ) (210 ) Net Interest Income $ 29,153 $ 28,673 $ 24,841 _________________________________ (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 $1.2 million for the fourth quarter of 2021, a decrease of $150,000 from $1.3 million for the third quarter of 2021, and a decrease of $2.8 million from $3.9 million for the fourth quarter of 2020. The provision recorded in the fourth quarter of 2021 was primarily attributable to growth of the loan portfolio. The allowance for loan losses to total loans was 1.42% at December 31, 2021, compared to 1.43% at September 30, 2021, and 1.50% at December 31, 2020. The allowance for loan losses to total loans, excluding PPP loans, was 1.43% at December 31, 2021, compared to 1.46% at September 30, 2021, and 1.59% at December 31, 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 Year Ended December 31, September 30, December 31, December 31, December 31, (dollars in thousands) 2021 2021 2020 2021 2020 Balance at Beginning of Period $ 38,901 $ 37,591 $ 31,381 $ 34,841 $ 22,526 Provision for Loan Losses 1,150 1,300 3,900 5,150 12,750 Charge-offs (37 ) (20 ) (463 ) (74 ) (517 ) Recoveries 6 30 23 103 82 Balance at End of Period $ 40,020 $ 38,901 $ 34,841 $ 40,020 $ 34,841 Noninterest Income Noninterest income was $1.3 million for the fourth quarter of 2021, a decrease of $122,000 from $1.4 million for the third quarter of 2021, and an increase of $302,000 from $986,000 for the fourth quarter of 2020. The linked-quarter decrease was primarily due to decreased gains on sales of securities and letter of credit fees. The year-over-year increase was primarily due to increased letter of credit fees and bank-owned life insurance income. The following table presents the major components of noninterest income for the periods indicated: Three Months Ended Year Ended December 31, September 30, December 31, December 31, December 31, (dollars in thousands) 2021 2021 2020 2021 2020 Noninterest Income: Customer Service Fees $ 274 $ 268 $ 251 $ 1,007 $ 826 Net Gain on Sales of Securities — 48 30 750 1,503 Letter of Credit Fees 541 577 477 1,676 1,503 Debit Card Interchange Fees 149 143 118 563 428 Swap Fees — — — — 907 Bank-Owned Life Insurance 150 166 — 316 — Other Income 174 208 110 997 672 Totals $ 1,288 $ 1,410 $ 986 $ 5,309 $ 5,839 Noninterest Expense Noninterest expense was $12.5 million for the fourth quarter of 2021, a decrease of $777,000 from $13.2 million for the third quarter of 2021, and a decrease of $2.8 million from $15.3 million for the fourth quarter of 2020. The linked-quarter decrease was primarily due to lower salaries and employee benefits related to higher bonus accruals in the third quarter of 2021, and $582,000 of debt prepayment fees associated with a partial early redemption of $11.3 million of subordinated debentures issued in July 2017 that occurred in the third quarter of 2021. The year-over-year decrease was primarily attributable to $5.6 million of debt prepayment fees associated with the early extinguishment of $69.0 million of FHLB term advances incurred in the fourth quarter of 2020, partially offset by an increase in salaries and employee benefits, and marketing and advertising expenses. The following table presents the major components of noninterest expense for the periods indicated: Three Months Ended Year Ended December 31, September 30, December 31, December 31, December 31, (dollars in thousands) 2021 2021 2020 2021 2020 Noninterest Expense: Salaries and Employee Benefits $ 7,966 $ 8,309 $ 6,216 $ 30,889 $ 25,568 Occupancy and Equipment 939 942 979 3,916 3,258 FDIC Insurance Assessment 345 355 270 1,305 788 Data Processing 306 325 293 1,222 1,027 Professional and Consulting Fees 719 708 566 2,523 1,966 Information Technology and Telecommunications 554 598 397 2,163 1,374 Marketing and Advertising 469 418 143 1,487 788 Intangible Asset Amortization 48 48 48 191 191 Amortization of Tax Credit Investments 152 152 146 562 738 Debt Prepayment Fees — 582 5,613 582 7,043 Other Expense 961 799 587 3,255 2,646 Totals $ 12,459 $ 13,236 $ 15,258 $ 48,095 $ 45,387 The Company continues to add key talent across the organization, reaching 220 full-time equivalent employees at December 31, 2021, compared to 219 employees at September 30, 2021, and 183 employees at December 31, 2020. The efficiency ratio, a non-GAAP financial measure, was 40.8% for the fourth quarter of 2021, compared to 43.9% for the third quarter of 2021, and 59.0% for the fourth quarter of 2020. Excluding the impact of certain non-routine income and expenses, the adjusted efficiency ratio, a non-GAAP financial measure, was 40.3% for the fourth quarter of 2021, 41.5% for the third quarter of 2021 and 36.6% for the fourth quarter of 2020. The efficiencies of the Company’s “branch-light” model have positioned the Company well, and going forward, provide 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 fourth quarter of 2021 was 25.7%, a decrease from 26.0% for the third quarter of 2021 and an increase from 25.3% for the fourth quarter of 2020. The effective combined federal and state income tax rate for the year ended December 31, 2021 was 25.8%, compared to 23.8% for the year ended December 31, 2020. Balance Sheet Total assets at December 31, 2021 were $3.48 billion, a 2.6% increase from $3.39 billion at September 30, 2021, and an 18.8% increase from $2.93 billion at December 31, 2020. The linked-quarter increase in total assets was primarily due to strong organic loan growth, offset partially by a 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 the continued purchases of investment securities. Total gross loans at December 31, 2021 were $2.82 billion, an increase of $107.5 million, or 4.0%, over total gross loans of $2.71 billion at September 30, 2021, and an increase of $493.0 million, or 21.2%, over total gross loans of $2.33 billion at December 31, 2020. The increase in the loan portfolio during the fourth quarter of 2021 was primarily due to growth in the construction and land development, multifamily and CRE nonowner occupied segments, offset partially by the payoff of PPP loans. When excluding PPP loans, gross loans grew $135.5 million during the fourth quarter of 2021, or 20.2% on an annualized basis. The Company's continued strong loan growth has been driven by the expansion of its talented lending teams, PPP-related new client acquisitions, the strong, growing brand of the Bank in the Twin Cities market and the M&A-related market disruption in the Twin Cities resulting in client and banker acquisition opportunities. The following table presents the dollar composition of the Company’s loan portfolio, by category, at the dates indicated: December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 (dollars in thousands) Commercial $ 360,169 $ 350,081 $ 321,474 $ 301,023 $ 304,220 Paycheck Protection Program 26,162 54,190 99,072 163,258 138,454 Construction and Land Development 281,474 257,167 251,573 193,372 170,217 Real Estate Mortgage: 1 - 4 Family Mortgage 305,317 290,535 277,943 294,964 294,479 Multifamily 910,243 865,172 790,275 665,415 626,465 CRE Owner Occupied 111,096 101,834 87,507 79,665 75,604 CRE Nonowner Occupied 818,569 786,271 758,101 720,396 709,300 Total Real Estate Mortgage Loans 2,145,225 2,043,812 1,913,826 1,760,440 1,705,848 Consumer and Other 6,442 6,762 8,241 8,030 7,689 Total Loans, Gross 2,819,472 2,712,012 2,594,186 2,426,123 2,326,428 Allowance for Loan Losses (40,020 ) (38,901 ) (37,591 ) (35,987 ) (34,841 ) Net Deferred Loan Fees (9,535 ) (10,199 ) (11,450 ) (11,273 ) (9,151 ) Total Loans, Net $ 2,769,917 $ 2,662,912 $ 2,545,145 $ 2,378,863 $ 2,282,436 Total deposits at December 31, 2021 were $2.95 billion, an increase of $92.1 million, or 3.2%, over total deposits of $2.85 billion at September 30, 2021, and an increase of $444.6 million, or 17.8%, over total deposits of $2.50 billion at December 31, 2020. Deposit growth in the fourth quarter of 2021 was primarily due to an increase in noninterest bearing and interest bearing transaction deposits and savings and money market deposits, offset partially by declines in time deposits and brokered 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 of the Bank in the Twin Cities market. However, given the prospect for higher interest rates, 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: December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 (dollars in thousands) Noninterest Bearing Transaction Deposits $ 875,084 $ 846,490 $ 758,023 $ 712,999 $ 671,903 Interest Bearing Transaction Deposits 544,789 488,785 432,123 433,344 366,290 Savings and Money Market Deposits 863,567 791,861 761,485 791,583 657,617 Time Deposits 293,474 309,824 321,857 344,581 353,543 Brokered Deposits 369,323 417,197 447,418 356,147 452,283 Total Deposits $ 2,946,237 $ 2,854,157 $ 2,720,906 $ 2,638,654 $ 2,501,636 Capital Total shareholders’ equity at December 31, 2021 was $379.3 million, an increase of $11.5 million, or 3.1%, over total shareholders’ equity of $367.8 million at September 30, 2021, and an increase of $113.9 million, or 42.9%, over total shareholders’ equity of $265.4 million at December 31, 2020. The linked-quarter increase was due to net income retained. The year-over-year increase was due to net income retained, the issuance of preferred stock and an increase in unrealized gains in the securities and derivatives portfolios. During the fourth quarter of 2021, the Company repurchased 3,320 shares of its common stock. Shares were repurchased at a weighted average price of $16.36 for a total of $54,000. The Company remains committed to maintaining strong capital levels while enhancing shareholder value as it strategically executes its stock repurchase program in this fluid economic environment. Tangible book value per share, a non-GAAP financial measure, was $10.98 as of December 31, 2021, an increase of 3.3% from $10.62 as of September 30, 2021, and an increase of 17.9% from $9.31 as of December 31, 2020. Tangible common equity as a percentage of tangible assets, a non-GAAP financial measure, was 8.91% at December 31, 2021, compared to 8.81% at September 30, 2021, and 8.96% at December 31, 2020. Asset Quality Annualized net charge-offs as a percent of average loans for both the third and fourth quarters of 2021 were 0.00%, compared to 0.08% for the fourth quarter of 2020. At December 31, 2021, the Company’s nonperforming assets, which include nonaccrual loans, loans past due 90 days and still accruing, and foreclosed assets, were $722,000, or 0.02% of total assets, as compared to $734,000, or 0.02% of total assets at September 30, 2021, and $775,000 or 0.03% of total assets at December 31, 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 December 31, 2021 totaled $49.3 million, compared to $67.4 million at September 30, 2021, and $44.8 million at December 31, 2020. 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 December 31, 2021 totaled $22.6 million, compared to $7.7 million at September 30, 2021, and $15.2 million at December 31, 2020. The linked-quarter increase to substandard loans was primarily due to the migration of two relationships previously listed as watch and both negatively impacted by the pandemic. Management continues to actively work with the borrowers and closely monitor substandard credits. The following table presents a summary of asset quality measurements at the dates indicated: As of and for the Three Months Ended December 31, September 30, June 30, March 31, December 31, (dollars in thousands) 2021 2021 2021 2021 2020 Selected Asset Quality Data Loans 30-89 Days Past Due $ 49 $ 18 $ — $ — $ 13 Loans 30-89 Days Past Due to Total Loans 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % Nonperforming Loans $ 722 $ 734 $ 761 $ 770 $ 775 Nonperforming Loans to Total Loans 0.03 % 0.03 % 0.03 % 0.03 % 0.03 % Foreclosed Assets $ — $ — $ — $ — $ — Nonaccrual Loans to Total Loans 0.03 % 0.03 % 0.03 % 0.03 % 0.03 % Nonaccrual Loans and Loans Past Due 90 Days and Still Accruing to Total Loans 0.03 0.03 0.03 0.03 0.03 Nonperforming Assets (1) $ 722 $ 734 $ 761 $ 770 $ 775 Nonperforming Assets to Total Assets (1) 0.02 % 0.02 % 0.02 % 0.03 % 0.03 % Allowance for Loan Losses to Total Loans 1.42 1.43 1.45 1.48 1.50 Allowance for Loan Losses to Total Loans, Excluding PPP Loans 1.43 1.46 1.50 1.59 1.59 Allowance for Loans Losses to Nonaccrual Loans 5,542.94 5,299.86 4,939.68 4,673.64 4,495.61 Net Loan Charge-Offs (Recoveries) (Annualized) to Average Loans 0.00 0.00 0.00 (0.01 ) 0.08 _________________________________ (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 12 modified loans totaling $35.0 million outstanding as of December 31, 2021, representing 1.3% of the total loan portfolio, excluding PPP loans, which is down slightly from $35.4 million at September 30, 2021. The following table presents a rollforward of loan modification activity, by modification type, from September 30, 2021 to December 31, 2021: (dollars in thousands) Interest-Only Extended Amortization Total Principal Balance - Beginning of Period $ 30,597 $ 4,764 $ 35,361 Modification Expired (468 ) — (468 ) Net Principal Advances (Payments) 120 (24 ) 96 Principal Balance - End of Period $ 30,249 $ 4,740 $ 34,989 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 $3.5 billion and seven branches as of December 31, 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 ongoing COVID-19 pandemic, including its effects on the economic environment, our clients and our operations, including due to supply chain disruptions, 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, including rising rates of inflation; 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, especially in light of recent excess liquidity at the Bank; 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; talent and labor shortages and high rates of employee turnover; 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, including from nonbank competitors such as credit unions and “fintech” companies; the effectiveness of our risk management framework; the commencement and outcome of litigation and other legal proceedings and regulatory actions against us; the impact of recent and future legislative and regulatory changes, including changes to federal and state corporate tax rates; interest rate risk, including the effects of anticipated rate increases by the Federal Reserve; 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. or state tax laws, regulations and guidance, including recent proposals to increase the federal corporate tax rate; 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) December 31, September 30, December 31, 2021 2021 2020 (Unaudited) (Unaudited) ASSETS Cash and Cash Equivalents $ 143,473 $ 189,502 $ 160,675 Bank-Owned Certificates of Deposit 1,876 1,877 2,860 Securities Available for Sale, at Fair Value 439,362 413,149 390,629 Loans, Net of Allowance for Loan Losses of $40,020 at December 31, 2021 (unaudited), $38,901 at September 30, 2021 (unaudited) and $34,841 at December 31, 2020 2,769,917 2,662,912 2,282,436 Federal Home Loan Bank (FHLB) Stock, at Cost 5,242 5,442 5,027 Premises and Equipment, Net 49,395 49,803 50,987 Accrued Interest 9,186 8,550 9,172 Goodwill 2,626 2,626 2,626 Other Intangible Assets, Net 479 527 670 Other Assets 56,103 54,737 22,263 Total Assets $ 3,477,659 $ 3,389,125 $ 2,927,345 LIABILITIES AND EQUITY LIABILITIES Deposits: Noninterest Bearing $ 875,084 $ 846,490 $ 671,903 Interest Bearing 2,071,153 2,007,667 1,829,733 Total Deposits 2,946,237 2,854,157 2,501,636 Notes Payable — — 11,000 FHLB Advances 42,500 47,500 57,500 Subordinated Debentures, Net of Issuance Costs 92,239 92,153 73,739 Accrued Interest Payable 1,409 1,656 1,615 Other Liabilities 16,002 25,856 16,450 Total Liabilities 3,098,387 3,021,322 2,661,940 SHAREHOLDERS' EQUITY Preferred Stock- $0.01 par value; Authorized 10,000,000 Preferred Stock - Issued and Outstanding 2,760,000 Series A shares ($25 liquidation preference) at December 31, 2021 (unaudited), 2,760,000 at September 30, 2021 (unaudited) and -0- at December 31, 2020 66,514 66,515 — Common Stock- $0.01 par value; Authorized 75,000,000 Common Stock - Issued and Outstanding 28,206,566 at December 31, 2021 (unaudited), 28,066,822 at September 30, 2021 (unaudited) and 28,143,493 at December 31, 2020 282 281 281 Additional Paid-In Capital 104,123 103,471 103,714 Retained Earnings 199,347 188,004 154,831 Accumulated Other Comprehensive Income 9,006 9,532 6,579 Total Shareholders' Equity 379,272 367,803 265,405 Total Liabilities and Shareholders' Equity $ 3,477,659 $ 3,389,125 $ 2,927,345 Bridgewater Bancshares, Inc. and Subsidiaries Consolidated Statements of Income (dollars in thousands, except per share data) Three Months Ended Year Ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 (Unaudited) (Unaudited) (Unaudited) (Unaudited) INTEREST INCOME Loans, Including Fees $ 31,140 $ 31,049 $ 28,242 $ 118,845 $ 105,492 Investment Securities 2,511 2,333 2,333 9,576 8,720 Other 124 135 124 458 614 Total Interest Income 33,775 33,517 30,699 128,879 114,826 INTEREST EXPENSE Deposits 3,241 3,417 4,079 13,842 19,813 Notes Payable — — 105 61 439 FHLB Advances 162 213 551 831 3,390 Subordinated Debentures 1,219 1,214 1,119 4,630 3,109 Federal Funds Purchased — — 4 6 111 Total Interest Expense 4,622 4,844 5,858 19,370 26,862 NET INTEREST INCOME 29,153 28,673 24,841 109,509 87,964 Provision for Loan Losses 1,150 1,300 3,900 5,150 12,750 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 28,003 27,373 20,941 104,359 75,214 NONINTEREST INCOME Customer Service Fees 274 268 251 1,007 826 Net Gain on Sales of Available for Sale Securities — 48 30 750 1,503 Other Income 1,014 1,094 705 3,552 3,510 Total Noninterest Income 1,288 1,410 986 5,309 5,839 NONINTEREST EXPENSE Salaries and Employee Benefits 7,966 8,309 6,216 30,889 25,568 Occupancy and Equipment 939 942 979 3,916 3,258 Other Expense 3,554 3,985 8,063 13,290 16,561 Total Noninterest Expense 12,459 13,236 15,258 48,095 45,387 INCOME BEFORE INCOME TAXES 16,832 15,547 6,669 61,573 35,666 Provision for Income Taxes 4,318 4,038 1,690 15,886 8,472 NET INCOME 12,514 11,509 4,979 45,687 27,194 Preferred Stock Dividends 1,171 — — 1,171 — NET INCOME TO COMMON SHAREHOLDERS $ 11,343 $ 11,509 $ 4,979 $ 44,516 $ 27,194 EARNINGS PER SHARE Basic $ 0.41 $ 0.41 $ 0.18 $ 1.59 $ 0.95 Diluted 0.39 0.40 0.17 1.54 0.93 Dividends Paid Per Common Share — — — — — Bridgewater Bancshares, Inc. and Subsidiaries Analysis of Average Balances, Yields and Rates (dollars in thousands, except per share data) For the Year Ended December 31, 2021 December 31, 2020 Average Interest Yield/ Average Interest Yield/ Balance & Fees Rate Balance & Fees Rate (dollars in thousands) Interest Earning Assets: Cash Investments $ 132,188 $ 199 0.15 % $ 80,113 $ 170 0.21 % Investment Securities: Taxable Investment Securities 317,954 7,015 2.21 234,873 5,712 2.43 Tax-Exempt Investment Securities (1) 75,313 3,242 4.30 87,587 3,807 4.35 Total Investment Securities 393,267 10,257 2.61 322,460 9,519 2.95 Paycheck Protection Program Loans (2) 103,151 6,441 6.24 122,240 4,143 3.39 Loans (1)(2) 2,481,706 112,587 4.54 2,032,180 101,469 4.99 Total Loans 2,584,857 119,028 4.60 2,154,420 105,612 4.90 Federal Home Loan Bank Stock 5,571 259 4.65 8,866 444 5.01 Total Interest Earning Assets 3,115,883 129,743 4.16 % 2,565,859 115,745 4.51 % Noninterest Earning Assets 73,917 51,720 Total Assets $ 3,189,800 $ 2,617,579 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 441,528 $ 2,052 0.46 % $ 295,036 $ 1,626 0.55 % Savings and Money Market Deposits 773,779 3,729 0.48 523,520 5,341 1.02 Time Deposits 323,638 4,099 1.27 374,195 7,806 2.09 Brokered Deposits 406,863 3,962 0.97 348,126 5,040 1.45 Total Interest Bearing Deposits 1,945,808 13,842 0.71 1,540,877 19,813 1.29 Federal Funds Purchased 2,479 6 0.24 7,239 111 1.53 Notes Payable 1,658 61 3.66 11,749 439 3.73 FHLB Advances 53,294 831 1.56 148,524 3,390 2.28 Subordinated Debentures 82,865 4,630 5.59 50,954 3,109 6.10 Total Interest Bearing Liabilities 2,086,104 19,370 0.93 % 1,759,343 26,862 1.53 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 764,087 579,595 Other Noninterest Bearing Liabilities 23,372 19,905 Total Noninterest Bearing Liabilities 787,459 599,500 Shareholders' Equity 316,237 258,736 Total Liabilities and Shareholders' Equity $ 3,189,800 $ 2,617,579 Net Interest Income / Interest Rate Spread 110,373 3.23 % 88,883 2.98 % Net Interest Margin (3) 3.54 % 3.46 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities (864 ) (919 ) Net Interest Income $ 109,509 $ 87,964 _________________________________ (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 Year Ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 Pre-Provision Net Revenue Noninterest Income $ 1,288 $ 1,410 $ 986 $ 5,309 $ 5,839 Less: Gain on sales of Securities — (48 ) (30 ) (750 ) (1,503 ) Total Operating Noninterest Income 1,288 1,362 956 4,559 4,336 Plus: Net Interest Income 29,153 28,673 24,841 109,509 87,964 Net Operating Revenue $ 30,441 $ 30,035 $ 25,797 $ 114,068 $ 92,300 Noninterest Expense $ 12,459 $ 13,236 $ 15,258 $ 48,095 $ 45,387 Less: Amortization of Tax Credit Investments (152 ) (152 ) (146 ) (562 ) (738 ) Less: Debt Prepayment Fees — (582 ) (5,613 ) (582 ) (7,043 ) Total Operating Noninterest Expense $ 12,307 $ 12,502 $ 9,499 $ 46,951 $ 37,606 Pre-Provision Net Revenue $ 18,134 $ 17,533 $ 16,298 $ 67,117 $ 54,694 Plus: Non-Operating Revenue Adjustments — 48 30 750 1,503 Less: Provision for Loan Losses 1,150 1,300 3,900 5,150 12,750 Non-Operating Expense Adjustments 152 734 5,759 1,144 7,781 Provision for Income Taxes 4,318 4,038 1,690 15,886 8,472 Net Income $ 12,514 $ 11,509 $ 4,979 $ 45,687 $ 27,194 Average Assets $ 3,403,270 $ 3,332,301 $ 2,816,032 $ 3,189,800 $ 2,617,579 Pre-Provision Net Revenue Return on Average Assets 2.11 % 2.09 % 2.30 % 2.10 % 2.09 % As of and for the Three Months Ended As of and for the Year Ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 Core Net Interest Margin Net Interest Income (Tax-Equivalent Basis) $ 29,388 $ 28,880 $ 25,051 $ 110,373 $ 88,883 Less: Loan Fees (1,462 ) (1,487 ) (1,514 ) (5,173 ) (5,283 ) Less: PPP Interest and Fees (1,057 ) (1,753 ) (2,097 ) (6,441 ) (4,143 ) Core Net Interest Income $ 26,869 $ 25,640 $ 21,440 $ 98,759 $ 79,457 Average Interest Earning Assets 3,320,603 3,234,301 2,759,543 3,115,883 2,565,859 Less: Average PPP Loans (39,900 ) (76,006 ) (165,099 ) (103,151 ) (122,240 ) Core Average Interest Earning Assets $ 3,280,703 $ 3,158,295 $ 2,594,444 $ 3,012,732 $ 2,443,619 Core Net Interest Margin 3.25 % 3.22 % 3.29 % 3.28 % 3.25 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended For the Year Ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 Efficiency Ratio Noninterest Expense $ 12,459 $ 13,236 $ 15,258 $ 48,095 $ 45,387 Less: Amortization of Intangible Assets (48 ) (48 ) (48 ) (191 ) (191 ) Adjusted Noninterest Expense $ 12,411 $ 13,188 $ 15,210 $ 47,904 $ 45,196 Net Interest Income $ 29,153 $ 28,673 $ 24,841 $ 109,509 $ 87,964 Noninterest Income 1,288 1,410 986 5,309 5,839 Less: Gain on Sales of Securities — (48 ) (30 ) (750 ) (1,503 ) Adjusted Operating Revenue $ 30,441 $ 30,035 $ 25,797 $ 114,068 $ 92,300 Efficiency Ratio 40.8 % 43.9 % 59.0 % 42.0 % 49.0 % Adjusted Efficiency Ratio Noninterest Expense $ 12,459 $ 13,236 $ 15,258 $ 48,095 $ 45,387 Less: Amortization of Tax Credit Investments (152 ) (152 ) (146 ) (562 ) (738 ) Less: Debt Prepayment Fees — (582 ) (5,613 ) (582 ) (7,043 ) Less: Amortization of Intangible Assets (48 ) (48 ) (48 ) (191 ) (191 ) Adjusted Noninterest Expense $ 12,259 $ 12,454 $ 9,451 $ 46,760 $ 37,415 Net Interest Income $ 29,153 $ 28,673 $ 24,841 $ 109,509 $ 87,964 Noninterest Income 1,288 1,410 986 5,309 5,839 Less: Gain on Sales of Securities — (48 ) (30 ) (750 ) (1,503 ) Adjusted Operating Revenue $ 30,441 $ 30,035 $ 25,797 $ 114,068 $ 92,300 Adjusted Efficiency Ratio 40.3 % 41.5 % 36.6 % 41.0 % 40.5 % For the Three Months Ended For the Year Ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 Adjusted Noninterest Expense to Average Assets (Annualized) Noninterest Expense $ 12,459 $ 13,236 $ 15,258 $ 48,095 $ 45,387 Less: Amortization of Tax Credit Investments (152 ) (152 ) (146 ) (562 ) (738 ) Less: Debt Prepayment Fees — (582 ) (5,613 ) (582 ) (7,043 ) Adjusted Noninterest Expense $ 12,307 $ 12,502 $ 9,499 $ 46,951 $ 37,606 Average Assets $ 3,403,270 $ 3,332,301 $ 2,816,032 $ 3,189,800 $ 2,617,579 Adjusted Noninterest Expense to Average Assets (Annualized) 1.43 % 1.49 % 1.34 % 1.47 % 1.44 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) As of and for the Three Months Ended As of and for the Year Ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 Tangible Common Equity and Tangible Common Equity/Tangible Assets Total Shareholders' Equity $ 379,272 $ 367,803 $ 265,405 Less: Preferred Stock (66,514 ) (66,515 ) — Total Common Shareholders' Equity 312,758 301,288 265,405 Less: Intangible Assets (3,105 ) (3,153 ) (3,296 ) Tangible Common Equity $ 309,653 $ 298,135 $ 262,109 Total Assets $ 3,477,659 $ 3,389,125 $ 2,927,345 Less: Intangible Assets (3,105 ) (3,153 ) (3,296 ) Tangible Assets $ 3,474,554 $ 3,385,972 $ 2,924,049 Tangible Common Equity/Tangible Assets 8.91 % 8.81 % 8.96 % Tangible Book Value Per Share Book Value Per Common Share $ 11.09 $ 10.73 $ 9.43 Less: Effects of Intangible Assets (0.11 ) (0.11 ) (0.12 ) Tangible Book Value Per Common Share $ 10.98 $ 10.62 $ 9.31 Return on Average Tangible Common Equity Net Income Available to Common Shareholders $ 11,343 $ 11,509 $ 4,979 $ 44,516 $ 27,194 Average Shareholders' Equity $ 374,035 $ 330,604 $ 265,716 $ 316,237 $ 258,736 Less: Average Preferred Stock (66,515 ) (32,332 ) — (24,915 ) — Average Common Equity 307,520 298,272 265,716 291,322 258,736 Less: Effects of Average Intangible Assets (3,132 ) (3,180 ) (3,323 ) (3,204 ) (3,395 ) Average Tangible Common Equity $ 304,388 $ 295,092 $ 262,393 $ 288,118 $ 255,341 Return on Average Tangible Common Equity 14.78 % 15.47 % 7.55 % 15.45 % 10.65 % Three Months Ended December 31, September 30, June 30, March 31, December 31, 2021 2021 2021 2021 2020 Tangible Common Equity Total Shareholders' Equity $ 379,272 $ 367,803 $ 290,830 $ 279,171 $ 265,405 Less: Preferred Stock (66,514 ) (66,515 ) — — — Common Shareholders' Equity 312,758 301,288 290,830 279,171 265,405 Less: Intangible Assets (3,105 ) (3,153 ) (3,200 ) (3,248 ) (3,296 ) Tangible Common Equity $ 309,653 $ 298,135 $ 287,630 $ 275,923 $ 262,109 As of and for the Three Months Ended As of and for the Year Ended December 31, 2021 September 30, 2021 December 31, 2020 December 31, 2021 December 31, 2020 Adjusted Diluted Earnings Per Common Share Net Income Available to Common Shareholders $ 11,343 $ 11,509 $ 4,979 $ 44,516 $ 27,194 Add: Debt Prepayment Fees — 582 5,613 582 7,043 Less: Tax Impact — (151 ) (1,336 ) (151 ) (1,676 ) Net Income, Excluding Impact of Debt Prepayment Fees $ 11,343 $ 11,940 $ 9,256 $ 44,947 $ 32,561 Diluted Weighted Average Shares Outstanding 29,038,785 29,110,547 28,823,384 28,968,286 29,170,220 Adjusted Diluted Earnings Per Common Share $ 0.39 $ 0.41 $ 0.32 $ 1.55 $ 1.12 View source version on businesswire.com: https://www.businesswire.com/news/home/20220126005633/en/Contacts 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Bridgewater Bancshares, Inc. Announces Record Fourth Quarter 2021 Net Income of $12.5 Million, $0.39 Diluted Earnings Per Common Share By: Bridgewater Bancshares, Inc. via Business Wire January 27, 2022 at 07:05 AM EST Bridgewater Bancshares, Inc. (Nasdaq: BWB) (the Company), the parent company of Bridgewater Bank (the Bank), today announced net income of $12.5 million for the fourth quarter of 2021, an 8.7% increase over net income of $11.5 million for the third quarter of 2021, and a 151.3% increase over net income of $5.0 million for the fourth quarter of 2020. Net income per diluted common share for the fourth quarter of 2021 was $0.39, a 1.2% decrease compared to $0.40 per diluted common share for the third quarter of 2021, and a 126.1% increase compared to $0.17 per diluted common share for the same period in 2020. “Bridgewater reported a fourth consecutive quarter of record net income driven by the continuation of many of the same trends and momentum we created throughout 2021,” said Chairman, Chief Executive Officer, and President, Jerry Baack. “During the quarter, we continued to generate strong loan production and gather high-quality deposits across the Twin Cities market, leading to robust balance sheet growth. This level of consistent growth in today’s environment, along with a business model operating with a low 40% adjusted efficiency ratio, stable net interest margin and strong asset quality, remain key differentiators for us. As we look ahead to 2022, we expect to continue to leverage the ongoing M&A-related market disruption and our strengthening brand to drive additional balance sheet and revenue growth; make proactive investments in business scalability, automation and back-office functions; and maintain our highly efficient operating strategy. With a hard-working team of talented professionals supporting our clients every day and a strong capital and liquidity position, we are poised to build on our momentum into 2022 and beyond.” The Company today also announced that its Board of Directors declared a quarterly cash dividend on its 5.875% Non-Cumulative Perpetual Preferred Stock, Series A ("Series A Preferred Stock"). The quarterly cash dividend of $36.72 per share, equivalent to $0.3672 per depositary share, each representing a 1/100th interest in a share of the Series A Preferred Stock (Nasdaq: BWBBP), is payable on March 1, 2022 to shareholders of record of the Series A Preferred Stock at the close of business on February 15, 2022. Fourth Quarter 2021 Financial Results Diluted Nonperforming Adjusted ROA PPNR ROA (1) ROE earnings per share assets to total assets efficiency ratio (1) 1.46 % 2.11 % 13.27 % $ 0.39 0.02 % 40.3 % _________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. Fourth Quarter 2021 Highlights Diluted earnings per common share were $0.39 for the fourth quarter of 2021, compared to $0.40 per common share for the third quarter of 2021. Payment of the Company’s first quarterly preferred stock dividend negatively impacted diluted earnings per common share by $0.04 in the fourth quarter of 2021, compared to no preferred stock dividend payment in the third quarter of 2021. Annualized return on average assets (ROA) and annualized return on average shareholders’ equity (ROE) for the fourth quarter of 2021 were 1.46% and 13.27%, compared to ROA and ROE of 1.37% and 13.81%, respectively, for the third quarter of 2021. Annualized return on average tangible common equity, a non-GAAP financial measure, was 14.78% for the fourth quarter of 2021, compared to 15.47% for the third quarter of 2021. Pre-provision net revenue (PPNR), a non-GAAP financial measure, was $18.1 million for the fourth quarter of 2021, compared to $17.5 million for the third quarter of 2021. PPNR ROA, a non-GAAP financial measure, was 2.11% for the fourth quarter of 2021, compared to 2.09% for the third quarter of 2021. Gross loans increased $107.5 million in the fourth quarter of 2021, or 15.7% annualized, compared to the third quarter of 2021. Gross loans, excluding Paycheck Protection Program (PPP) loans, increased $135.5 million in the fourth quarter of 2021, or 20.2% annualized, compared to the third quarter of 2021. Deposits increased $92.1 million in the fourth quarter of 2021, or 12.8% annualized, compared to the third quarter of 2021. Net interest margin (on a fully tax-equivalent basis) was 3.51% for the fourth quarter of 2021, compared to 3.54% in the third quarter of 2021. 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, expanded 3 basis points from 3.22% in the third quarter of 2021 to 3.25% in the fourth 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 40.3% for the fourth quarter of 2021, compared to 41.5% for the third quarter of 2021. A loan loss provision of $1.2 million was recorded in the fourth quarter of 2021 to support strong organic loan growth. The allowance for loan losses to total loans was 1.42% at December 31, 2021, compared to 1.43% at September 30, 2021. The allowance for loan losses to total loans, excluding PPP loans, was 1.43% at December 31, 2021, compared to 1.46% at September 30, 2021. Annualized net loan charge-offs as a percentage of average loans were 0.00% for both the fourth quarter of 2021, and the third quarter of 2021. Tangible book value per share, a non-GAAP financial measure, increased $0.36, or 13.6% annualized, to $10.98 at December 31, 2021, compared to $10.62 at September 30, 2021. Annual 2021 Highlights Diluted earnings per common share for the year ended December 31, 2021 were $1.54, a 64.8% increase, compared to $0.93 for the year ended December 31, 2020. PPNR, a non-GAAP financial measure, was $67.1 million for the year ended December 31, 2021, an increase of 22.7%, compared to $54.7 million for the year ended December 31, 2020. PPNR ROA, a non-GAAP financial measure, was 2.10% for the year ended December 31, 2021, compared to 2.09% for the year ended December 31, 2020. Gross loans increased $493.0 million at December 31, 2021, or 21.2%, compared to December 31, 2020. Excluding PPP loans, gross loans increased 27.7%, at December 31, 2021, compared to December 31, 2020. Deposits increased $444.6 million at December 31, 2021, or 17.8%, compared to December 31, 2020. Net interest margin (on a fully tax-equivalent basis) was 3.54% for the year ended December 31, 2021, compared to 3.46% for the year ended December 31, 2020. Core net interest margin (on a fully tax-equivalent basis), a non-GAAP financial measure, for the year ended December 31, 2021 was 3.28%, compared to 3.25% for the year ended December 31, 2020. The adjusted efficiency ratio, a non-GAAP financial measure, was 41.0% for the year ended December 31, 2021, compared to 40.5% for the year ended December 31, 2020. Net loan charge-offs as a percentage of average loans were 0.00% for the year ended December 31, 2021, compared to 0.02% for the year ended December 31, 2020. The ratio of nonperforming assets to total assets was 0.02% at December 31, 2021, compared to 0.03% at December 31, 2020. Tangible book value per share, a non-GAAP financial measure, increased 17.9%, or $1.66, to $10.98 at December 31, 2021, compared to $9.31 at December 31, 2020. Key Financial Measures As of and for the Three Months Ended As of and for the Year Ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 Per Common Share Data Basic Earnings Per Share $ 0.41 $ 0.41 $ 0.18 $ 1.59 $ 0.95 Diluted Earnings Per Share 0.39 0.40 0.17 1.54 0.93 Adjusted Diluted Earnings Per Share (1) 0.39 0.41 0.32 1.55 1.12 Book Value Per Share 11.09 10.73 9.43 Tangible Book Value Per Share (1) 10.98 10.62 9.31 Basic Weighted Average Shares Outstanding 28,004,334 28,047,280 28,179,768 28,027,454 28,582,064 Diluted Weighted Average Shares Outstanding 29,038,785 29,110,547 28,823,384 28,968,286 29,170,220 Shares Outstanding at Period End 28,206,566 28,066,822 28,143,493 Selected Performance Ratios Return on Average Assets (Annualized) 1.46 % 1.37 % 0.70 % 1.43 % 1.04 % Pre-Provision Net Revenue Return on Average Assets (Annualized) (1) 2.11 2.09 2.30 2.10 2.09 Return on Average Shareholders' Equity (Annualized) 13.27 13.81 7.45 14.45 10.51 Return on Average Tangible Common Equity (Annualized) (1) 14.78 15.47 7.55 15.45 10.65 Yield on Interest Earning Assets 4.06 4.14 4.46 4.16 4.51 Yield on Total Loans, Gross 4.49 4.65 4.89 4.60 4.90 Cost of Interest Bearing Liabilities 0.86 0.88 1.24 0.93 1.53 Cost of Total Deposits 0.45 0.48 0.69 0.51 0.93 Net Interest Margin (2) 3.51 3.54 3.61 3.54 3.46 Core Net Interest Margin (1)(2) 3.25 3.22 3.29 3.28 3.25 Efficiency Ratio (1) 40.8 43.9 59.0 42.0 49.0 Adjusted Efficiency Ratio (1) 40.3 41.5 36.6 41.0 40.5 Noninterest Expense to Average Assets (Annualized) 1.45 1.58 2.16 1.51 1.73 Adjusted Noninterest Expense to Average Assets (Annualized) (1) 1.43 1.49 1.34 1.47 1.44 Loan to Deposit Ratio 95.7 95.0 93.0 Core Deposits to Total Deposits (3) 85.4 83.3 78.1 Tangible Common Equity to Tangible Assets (1) 8.91 8.81 8.96 Capital Ratios (Bank Only) (4) Tier 1 Leverage Ratio 11.09 % 10.96 % 10.89 % Common Equity Tier 1 Risk-based Capital Ratio 11.69 11.88 12.12 Tier 1 Risk-based Capital Ratio 11.69 11.88 12.12 Total Risk-based Capital Ratio 12.94 13.13 13.37 Capital Ratios (Consolidated) (4) Tier 1 Leverage Ratio 10.82 % 10.70 % 9.28 % Common Equity Tier 1 Risk-based Capital Ratio 9.36 9.47 10.35 Tier 1 Risk-based Capital Ratio 11.43 11.65 10.35 Total Risk-based Capital Ratio 15.55 15.93 14.58 _________________________________ (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 December 31, September 30, June 30, March 31, December 31, (dollars in thousands) 2021 2021 2021 2021 2020 Selected Balance Sheet Data Total Assets $ 3,477,659 $ 3,389,125 $ 3,162,612 $ 3,072,359 $ 2,927,345 Total Loans, Gross 2,819,472 2,712,012 2,594,186 2,426,123 2,326,428 Allowance for Loan Losses 40,020 38,901 37,591 35,987 34,841 Goodwill and Other Intangibles 3,105 3,153 3,200 3,248 3,296 Deposits 2,946,237 2,854,157 2,720,906 2,638,654 2,501,636 Tangible Common Equity (1) 309,653 298,135 287,630 275,923 262,109 Total Shareholders' Equity 379,272 367,803 290,830 279,171 265,405 Average Total Assets - Quarter-to-Date 3,403,270 3,332,301 3,076,712 2,940,262 2,816,032 Average Shareholders' Equity - Quarter-to-Date 374,035 330,604 286,311 272,729 265,716 _________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. For the Three Months Ended For the Year Ended December 31, September 30, December 31, December 31, December 31, (dollars in thousands) 2021 2021 2020 2021 2020 Selected Income Statement Data Interest Income $ 33,775 $ 33,517 $ 30,699 $ 128,879 $ 114,826 Interest Expense 4,622 4,844 5,858 19,370 26,862 Net Interest Income 29,153 28,673 24,841 109,509 87,964 Provision for Loan Losses 1,150 1,300 3,900 5,150 12,750 Net Interest Income after Provision for Loan Losses 28,003 27,373 20,941 104,359 75,214 Noninterest Income 1,288 1,410 986 5,309 5,839 Noninterest Expense 12,459 13,236 15,258 48,095 45,387 Income Before Income Taxes 16,832 15,547 6,669 61,573 35,666 Provision for Income Taxes 4,318 4,038 1,690 15,886 8,472 Net Income 12,514 11,509 4,979 45,687 27,194 Preferred Stock Dividends (1,171 ) — — (1,171 ) — Net Income Available to Common Shareholders $ 11,343 $ 11,509 $ 4,979 $ 44,516 $ 27,194 Income Statement Net Interest Income Net interest income was $29.2 million for the fourth quarter of 2021, an increase of $480,000, or 1.7%, from $28.7 million in the third quarter of 2021, and an increase of $4.3 million, or 17.4%, from $24.8 million in the fourth 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 and lower rates paid on deposits, offset partially by declining yields on loans. Average interest earning assets were $3.32 billion for the fourth quarter of 2021, an increase of $86.3 million, or 2.7%, from $3.23 billion for the third quarter of 2021, and an increase of $561.1 million, or 20.3%, from $2.76 billion for the fourth quarter of 2020. The linked-quarter increase in average interest earning assets was primarily due to continued strong organic growth in the loan portfolio, offset partially by the payoff of PPP loans and the reduction of cash balances. The year-over-year increase in average interest earning assets was primarily due to increased cash balances, continued purchases of investment securities, and strong organic growth in the loan portfolio, offset partially by the payoff of PPP loans. Net interest margin (on a fully tax-equivalent basis) for the fourth quarter of 2021 was 3.51%, a 3 basis point decrease from 3.54% in the third quarter of 2021, and a 10 basis point decrease from 3.61% in the fourth 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 fourth quarter of 2021 was 3.25%, a 3 basis point increase from 3.22% in the third quarter of 2021, and a 4 basis point decline from 3.29% in the fourth quarter of 2020. As the PPP loan portfolio pays down, the recognition of fees associated with the originations has benefited net interest margin for each of the past four quarters. The SBA has been forgiving PPP loans, which has accelerated the recognition of PPP fees starting in the fourth quarter of 2020 and continuing through the fourth quarter of 2021. The Company recognized $958,000 of PPP origination fees during the fourth quarter of 2021, compared to $1.6 million during the third quarter of 2021. The elevated fee recognition is illustrated in the 10.51% PPP loan yield for the fourth quarter of 2021, compared to 9.15% for the third quarter of 2021. Remaining PPP origination fees to be recognized as of December 31, 2021 were $898,000. The following table summarizes PPP loan originations and net origination fees as of December 31, 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 17 $ 1,109 $ 5,706 $ 5,698 Round Two PPP Loans 651 78,386 136 25,053 3,544 2,654 Totals 1,851 $ 259,986 153 $ 26,162 $ 9,250 $ 8,352 Interest income was $33.8 million for the fourth quarter of 2021, an increase of $258,000, or 0.8%, from $33.5 million in the third quarter of 2021, and an increase of $3.1 million, or 10.0%, from $30.7 million in the fourth quarter of 2020. The yield on interest earning assets (on a fully tax-equivalent basis) was 4.06% in the fourth quarter of 2021, compared to 4.14% in the third quarter of 2021, and 4.46% in the fourth 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 core loan yield, as well as lower PPP origination fees recognized during the period. The year-over-year decline in the yield on interest earning assets was primarily due to excess cash balances and 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 4.41% in the fourth quarter of 2021, which was 10 basis points lower than 4.51% in the third quarter of 2021, and 46 basis points lower than 4.87% in the fourth 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 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 Interest 4.20 % 4.28 % 4.37 % 4.50 % 4.59 % Fees 0.21 0.23 0.17 0.22 0.28 Yield on Loans, Excluding PPP Loans 4.41 % 4.51 % 4.54 % 4.72 % 4.87 % Interest expense was $4.6 million for the fourth quarter of 2021, a decrease of $222,000, or 4.6%, from $4.8 million in the third quarter of 2021, and a decrease of $1.2 million, or 21.1%, from $5.9 million in the fourth quarter of 2020. The cost of interest bearing liabilities declined 2 basis points on a linked-quarter basis from 0.88% in the third quarter of 2021 to 0.86% in the fourth quarter of 2021, primarily due to lower rates paid on deposits. On a year-over-year basis, the cost of interest bearing liabilities decreased 38 basis points from 1.24% in the fourth quarter of 2020 to 0.86% in the fourth 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 $3.2 million for the fourth quarter of 2021, a decrease of $176,000, or 5.2%, from $3.4 million in the third quarter of 2021, and a decrease of $838,000, or 20.5%, from $4.1 million in the fourth quarter of 2020. The cost of total deposits declined 3 basis points on a linked-quarter basis from 0.48% in the third quarter of 2021, and declined 24 basis points on a year-over-year basis from 0.69% in the fourth quarter of 2020, to 0.45% in the fourth quarter of 2021, primarily due to deposit rate cuts consistent with a lower rate environment and the continued downward repricing of time deposits. A summary of the Company’s average balances, interest yields and rates, and net interest margin for the three months ended December 31, 2021, September 30, 2021, and December 31, 2020 is as follows: For the Three Months Ended December 31, 2021 September 30, 2021 December 31, 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 $ 146,744 $ 65 0.18 % $ 187,405 $ 67 0.14 % $ 79,896 $ 32 0.16 % Investment Securities: Taxable Investment Securities 341,325 1,893 2.20 314,367 1,751 2.21 290,093 1,632 2.24 Tax-Exempt Investment Securities (1) 71,602 782 4.33 71,801 737 4.07 81,370 888 4.34 Total Investment Securities 412,927 2,675 2.57 386,168 2,488 2.56 371,463 2,520 2.70 Paycheck Protection Program Loans (2) 39,900 1,057 10.51 76,006 1,753 9.15 165,099 2,097 5.05 Loans (1)(2) 2,715,722 30,154 4.41 2,579,021 29,348 4.51 2,136,229 26,168 4.87 Total Loans 2,755,622 31,211 4.49 2,655,027 31,101 4.65 2,301,328 28,265 4.89 Federal Home Loan Bank Stock 5,310 59 4.39 5,701 68 4.65 6,856 92 5.35 Total Interest Earning Assets 3,320,603 34,010 4.06 % 3,234,301 33,724 4.14 % 2,759,543 30,909 4.46 % Noninterest Earning Assets 82,667 98,000 56,489 Total Assets $ 3,403,270 $ 3,332,301 $ 2,816,032 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 499,475 $ 548 0.43 % $ 479,580 $ 562 0.47 % $ 353,806 $ 420 0.47 % Savings and Money Market Deposits 803,848 876 0.43 801,354 904 0.45 538,030 1,003 0.74 Time Deposits 299,823 830 1.10 318,222 928 1.16 362,469 1,607 1.76 Brokered Deposits 404,438 987 0.97 440,167 1,023 0.92 433,037 1,049 0.96 Total Interest Bearing Deposits 2,007,584 3,241 0.64 2,039,323 3,417 0.66 1,687,342 4,079 0.96 Federal Funds Purchased 10 — 0.67 — — — 4,072 4 0.33 Notes Payable — — — — — — 11,000 105 3.77 FHLB Advances 44,185 162 1.46 54,130 213 1.56 99,196 551 2.21 Subordinated Debentures 92,189 1,219 5.25 91,337 1,214 5.27 73,696 1,119 6.04 Total Interest Bearing Liabilities 2,143,968 4,622 0.86 % 2,184,790 4,844 0.88 % 1,875,306 5,858 1.24 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 861,473 784,148 654,299 Other Noninterest Bearing Liabilities 23,794 32,759 20,711 Total Noninterest Bearing Liabilities 885,267 816,907 675,010 Shareholders' Equity 374,035 330,604 265,716 Total Liabilities and Shareholders' Equity $ 3,403,270 $ 3,332,301 $ 2,816,032 Net Interest Income / Interest Rate Spread 29,388 3.20 % 28,880 3.26 % 25,051 3.22 % Net Interest Margin (3) 3.51 % 3.54 % 3.61 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities and Loans (235 ) (207 ) (210 ) Net Interest Income $ 29,153 $ 28,673 $ 24,841 _________________________________ (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 $1.2 million for the fourth quarter of 2021, a decrease of $150,000 from $1.3 million for the third quarter of 2021, and a decrease of $2.8 million from $3.9 million for the fourth quarter of 2020. The provision recorded in the fourth quarter of 2021 was primarily attributable to growth of the loan portfolio. The allowance for loan losses to total loans was 1.42% at December 31, 2021, compared to 1.43% at September 30, 2021, and 1.50% at December 31, 2020. The allowance for loan losses to total loans, excluding PPP loans, was 1.43% at December 31, 2021, compared to 1.46% at September 30, 2021, and 1.59% at December 31, 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 Year Ended December 31, September 30, December 31, December 31, December 31, (dollars in thousands) 2021 2021 2020 2021 2020 Balance at Beginning of Period $ 38,901 $ 37,591 $ 31,381 $ 34,841 $ 22,526 Provision for Loan Losses 1,150 1,300 3,900 5,150 12,750 Charge-offs (37 ) (20 ) (463 ) (74 ) (517 ) Recoveries 6 30 23 103 82 Balance at End of Period $ 40,020 $ 38,901 $ 34,841 $ 40,020 $ 34,841 Noninterest Income Noninterest income was $1.3 million for the fourth quarter of 2021, a decrease of $122,000 from $1.4 million for the third quarter of 2021, and an increase of $302,000 from $986,000 for the fourth quarter of 2020. The linked-quarter decrease was primarily due to decreased gains on sales of securities and letter of credit fees. The year-over-year increase was primarily due to increased letter of credit fees and bank-owned life insurance income. The following table presents the major components of noninterest income for the periods indicated: Three Months Ended Year Ended December 31, September 30, December 31, December 31, December 31, (dollars in thousands) 2021 2021 2020 2021 2020 Noninterest Income: Customer Service Fees $ 274 $ 268 $ 251 $ 1,007 $ 826 Net Gain on Sales of Securities — 48 30 750 1,503 Letter of Credit Fees 541 577 477 1,676 1,503 Debit Card Interchange Fees 149 143 118 563 428 Swap Fees — — — — 907 Bank-Owned Life Insurance 150 166 — 316 — Other Income 174 208 110 997 672 Totals $ 1,288 $ 1,410 $ 986 $ 5,309 $ 5,839 Noninterest Expense Noninterest expense was $12.5 million for the fourth quarter of 2021, a decrease of $777,000 from $13.2 million for the third quarter of 2021, and a decrease of $2.8 million from $15.3 million for the fourth quarter of 2020. The linked-quarter decrease was primarily due to lower salaries and employee benefits related to higher bonus accruals in the third quarter of 2021, and $582,000 of debt prepayment fees associated with a partial early redemption of $11.3 million of subordinated debentures issued in July 2017 that occurred in the third quarter of 2021. The year-over-year decrease was primarily attributable to $5.6 million of debt prepayment fees associated with the early extinguishment of $69.0 million of FHLB term advances incurred in the fourth quarter of 2020, partially offset by an increase in salaries and employee benefits, and marketing and advertising expenses. The following table presents the major components of noninterest expense for the periods indicated: Three Months Ended Year Ended December 31, September 30, December 31, December 31, December 31, (dollars in thousands) 2021 2021 2020 2021 2020 Noninterest Expense: Salaries and Employee Benefits $ 7,966 $ 8,309 $ 6,216 $ 30,889 $ 25,568 Occupancy and Equipment 939 942 979 3,916 3,258 FDIC Insurance Assessment 345 355 270 1,305 788 Data Processing 306 325 293 1,222 1,027 Professional and Consulting Fees 719 708 566 2,523 1,966 Information Technology and Telecommunications 554 598 397 2,163 1,374 Marketing and Advertising 469 418 143 1,487 788 Intangible Asset Amortization 48 48 48 191 191 Amortization of Tax Credit Investments 152 152 146 562 738 Debt Prepayment Fees — 582 5,613 582 7,043 Other Expense 961 799 587 3,255 2,646 Totals $ 12,459 $ 13,236 $ 15,258 $ 48,095 $ 45,387 The Company continues to add key talent across the organization, reaching 220 full-time equivalent employees at December 31, 2021, compared to 219 employees at September 30, 2021, and 183 employees at December 31, 2020. The efficiency ratio, a non-GAAP financial measure, was 40.8% for the fourth quarter of 2021, compared to 43.9% for the third quarter of 2021, and 59.0% for the fourth quarter of 2020. Excluding the impact of certain non-routine income and expenses, the adjusted efficiency ratio, a non-GAAP financial measure, was 40.3% for the fourth quarter of 2021, 41.5% for the third quarter of 2021 and 36.6% for the fourth quarter of 2020. The efficiencies of the Company’s “branch-light” model have positioned the Company well, and going forward, provide 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 fourth quarter of 2021 was 25.7%, a decrease from 26.0% for the third quarter of 2021 and an increase from 25.3% for the fourth quarter of 2020. The effective combined federal and state income tax rate for the year ended December 31, 2021 was 25.8%, compared to 23.8% for the year ended December 31, 2020. Balance Sheet Total assets at December 31, 2021 were $3.48 billion, a 2.6% increase from $3.39 billion at September 30, 2021, and an 18.8% increase from $2.93 billion at December 31, 2020. The linked-quarter increase in total assets was primarily due to strong organic loan growth, offset partially by a 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 the continued purchases of investment securities. Total gross loans at December 31, 2021 were $2.82 billion, an increase of $107.5 million, or 4.0%, over total gross loans of $2.71 billion at September 30, 2021, and an increase of $493.0 million, or 21.2%, over total gross loans of $2.33 billion at December 31, 2020. The increase in the loan portfolio during the fourth quarter of 2021 was primarily due to growth in the construction and land development, multifamily and CRE nonowner occupied segments, offset partially by the payoff of PPP loans. When excluding PPP loans, gross loans grew $135.5 million during the fourth quarter of 2021, or 20.2% on an annualized basis. The Company's continued strong loan growth has been driven by the expansion of its talented lending teams, PPP-related new client acquisitions, the strong, growing brand of the Bank in the Twin Cities market and the M&A-related market disruption in the Twin Cities resulting in client and banker acquisition opportunities. The following table presents the dollar composition of the Company’s loan portfolio, by category, at the dates indicated: December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 (dollars in thousands) Commercial $ 360,169 $ 350,081 $ 321,474 $ 301,023 $ 304,220 Paycheck Protection Program 26,162 54,190 99,072 163,258 138,454 Construction and Land Development 281,474 257,167 251,573 193,372 170,217 Real Estate Mortgage: 1 - 4 Family Mortgage 305,317 290,535 277,943 294,964 294,479 Multifamily 910,243 865,172 790,275 665,415 626,465 CRE Owner Occupied 111,096 101,834 87,507 79,665 75,604 CRE Nonowner Occupied 818,569 786,271 758,101 720,396 709,300 Total Real Estate Mortgage Loans 2,145,225 2,043,812 1,913,826 1,760,440 1,705,848 Consumer and Other 6,442 6,762 8,241 8,030 7,689 Total Loans, Gross 2,819,472 2,712,012 2,594,186 2,426,123 2,326,428 Allowance for Loan Losses (40,020 ) (38,901 ) (37,591 ) (35,987 ) (34,841 ) Net Deferred Loan Fees (9,535 ) (10,199 ) (11,450 ) (11,273 ) (9,151 ) Total Loans, Net $ 2,769,917 $ 2,662,912 $ 2,545,145 $ 2,378,863 $ 2,282,436 Total deposits at December 31, 2021 were $2.95 billion, an increase of $92.1 million, or 3.2%, over total deposits of $2.85 billion at September 30, 2021, and an increase of $444.6 million, or 17.8%, over total deposits of $2.50 billion at December 31, 2020. Deposit growth in the fourth quarter of 2021 was primarily due to an increase in noninterest bearing and interest bearing transaction deposits and savings and money market deposits, offset partially by declines in time deposits and brokered 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 of the Bank in the Twin Cities market. However, given the prospect for higher interest rates, 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: December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 (dollars in thousands) Noninterest Bearing Transaction Deposits $ 875,084 $ 846,490 $ 758,023 $ 712,999 $ 671,903 Interest Bearing Transaction Deposits 544,789 488,785 432,123 433,344 366,290 Savings and Money Market Deposits 863,567 791,861 761,485 791,583 657,617 Time Deposits 293,474 309,824 321,857 344,581 353,543 Brokered Deposits 369,323 417,197 447,418 356,147 452,283 Total Deposits $ 2,946,237 $ 2,854,157 $ 2,720,906 $ 2,638,654 $ 2,501,636 Capital Total shareholders’ equity at December 31, 2021 was $379.3 million, an increase of $11.5 million, or 3.1%, over total shareholders’ equity of $367.8 million at September 30, 2021, and an increase of $113.9 million, or 42.9%, over total shareholders’ equity of $265.4 million at December 31, 2020. The linked-quarter increase was due to net income retained. The year-over-year increase was due to net income retained, the issuance of preferred stock and an increase in unrealized gains in the securities and derivatives portfolios. During the fourth quarter of 2021, the Company repurchased 3,320 shares of its common stock. Shares were repurchased at a weighted average price of $16.36 for a total of $54,000. The Company remains committed to maintaining strong capital levels while enhancing shareholder value as it strategically executes its stock repurchase program in this fluid economic environment. Tangible book value per share, a non-GAAP financial measure, was $10.98 as of December 31, 2021, an increase of 3.3% from $10.62 as of September 30, 2021, and an increase of 17.9% from $9.31 as of December 31, 2020. Tangible common equity as a percentage of tangible assets, a non-GAAP financial measure, was 8.91% at December 31, 2021, compared to 8.81% at September 30, 2021, and 8.96% at December 31, 2020. Asset Quality Annualized net charge-offs as a percent of average loans for both the third and fourth quarters of 2021 were 0.00%, compared to 0.08% for the fourth quarter of 2020. At December 31, 2021, the Company’s nonperforming assets, which include nonaccrual loans, loans past due 90 days and still accruing, and foreclosed assets, were $722,000, or 0.02% of total assets, as compared to $734,000, or 0.02% of total assets at September 30, 2021, and $775,000 or 0.03% of total assets at December 31, 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 December 31, 2021 totaled $49.3 million, compared to $67.4 million at September 30, 2021, and $44.8 million at December 31, 2020. 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 December 31, 2021 totaled $22.6 million, compared to $7.7 million at September 30, 2021, and $15.2 million at December 31, 2020. The linked-quarter increase to substandard loans was primarily due to the migration of two relationships previously listed as watch and both negatively impacted by the pandemic. Management continues to actively work with the borrowers and closely monitor substandard credits. The following table presents a summary of asset quality measurements at the dates indicated: As of and for the Three Months Ended December 31, September 30, June 30, March 31, December 31, (dollars in thousands) 2021 2021 2021 2021 2020 Selected Asset Quality Data Loans 30-89 Days Past Due $ 49 $ 18 $ — $ — $ 13 Loans 30-89 Days Past Due to Total Loans 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % Nonperforming Loans $ 722 $ 734 $ 761 $ 770 $ 775 Nonperforming Loans to Total Loans 0.03 % 0.03 % 0.03 % 0.03 % 0.03 % Foreclosed Assets $ — $ — $ — $ — $ — Nonaccrual Loans to Total Loans 0.03 % 0.03 % 0.03 % 0.03 % 0.03 % Nonaccrual Loans and Loans Past Due 90 Days and Still Accruing to Total Loans 0.03 0.03 0.03 0.03 0.03 Nonperforming Assets (1) $ 722 $ 734 $ 761 $ 770 $ 775 Nonperforming Assets to Total Assets (1) 0.02 % 0.02 % 0.02 % 0.03 % 0.03 % Allowance for Loan Losses to Total Loans 1.42 1.43 1.45 1.48 1.50 Allowance for Loan Losses to Total Loans, Excluding PPP Loans 1.43 1.46 1.50 1.59 1.59 Allowance for Loans Losses to Nonaccrual Loans 5,542.94 5,299.86 4,939.68 4,673.64 4,495.61 Net Loan Charge-Offs (Recoveries) (Annualized) to Average Loans 0.00 0.00 0.00 (0.01 ) 0.08 _________________________________ (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 12 modified loans totaling $35.0 million outstanding as of December 31, 2021, representing 1.3% of the total loan portfolio, excluding PPP loans, which is down slightly from $35.4 million at September 30, 2021. The following table presents a rollforward of loan modification activity, by modification type, from September 30, 2021 to December 31, 2021: (dollars in thousands) Interest-Only Extended Amortization Total Principal Balance - Beginning of Period $ 30,597 $ 4,764 $ 35,361 Modification Expired (468 ) — (468 ) Net Principal Advances (Payments) 120 (24 ) 96 Principal Balance - End of Period $ 30,249 $ 4,740 $ 34,989 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 $3.5 billion and seven branches as of December 31, 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 ongoing COVID-19 pandemic, including its effects on the economic environment, our clients and our operations, including due to supply chain disruptions, 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, including rising rates of inflation; 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, especially in light of recent excess liquidity at the Bank; 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; talent and labor shortages and high rates of employee turnover; 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, including from nonbank competitors such as credit unions and “fintech” companies; the effectiveness of our risk management framework; the commencement and outcome of litigation and other legal proceedings and regulatory actions against us; the impact of recent and future legislative and regulatory changes, including changes to federal and state corporate tax rates; interest rate risk, including the effects of anticipated rate increases by the Federal Reserve; 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. or state tax laws, regulations and guidance, including recent proposals to increase the federal corporate tax rate; 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) December 31, September 30, December 31, 2021 2021 2020 (Unaudited) (Unaudited) ASSETS Cash and Cash Equivalents $ 143,473 $ 189,502 $ 160,675 Bank-Owned Certificates of Deposit 1,876 1,877 2,860 Securities Available for Sale, at Fair Value 439,362 413,149 390,629 Loans, Net of Allowance for Loan Losses of $40,020 at December 31, 2021 (unaudited), $38,901 at September 30, 2021 (unaudited) and $34,841 at December 31, 2020 2,769,917 2,662,912 2,282,436 Federal Home Loan Bank (FHLB) Stock, at Cost 5,242 5,442 5,027 Premises and Equipment, Net 49,395 49,803 50,987 Accrued Interest 9,186 8,550 9,172 Goodwill 2,626 2,626 2,626 Other Intangible Assets, Net 479 527 670 Other Assets 56,103 54,737 22,263 Total Assets $ 3,477,659 $ 3,389,125 $ 2,927,345 LIABILITIES AND EQUITY LIABILITIES Deposits: Noninterest Bearing $ 875,084 $ 846,490 $ 671,903 Interest Bearing 2,071,153 2,007,667 1,829,733 Total Deposits 2,946,237 2,854,157 2,501,636 Notes Payable — — 11,000 FHLB Advances 42,500 47,500 57,500 Subordinated Debentures, Net of Issuance Costs 92,239 92,153 73,739 Accrued Interest Payable 1,409 1,656 1,615 Other Liabilities 16,002 25,856 16,450 Total Liabilities 3,098,387 3,021,322 2,661,940 SHAREHOLDERS' EQUITY Preferred Stock- $0.01 par value; Authorized 10,000,000 Preferred Stock - Issued and Outstanding 2,760,000 Series A shares ($25 liquidation preference) at December 31, 2021 (unaudited), 2,760,000 at September 30, 2021 (unaudited) and -0- at December 31, 2020 66,514 66,515 — Common Stock- $0.01 par value; Authorized 75,000,000 Common Stock - Issued and Outstanding 28,206,566 at December 31, 2021 (unaudited), 28,066,822 at September 30, 2021 (unaudited) and 28,143,493 at December 31, 2020 282 281 281 Additional Paid-In Capital 104,123 103,471 103,714 Retained Earnings 199,347 188,004 154,831 Accumulated Other Comprehensive Income 9,006 9,532 6,579 Total Shareholders' Equity 379,272 367,803 265,405 Total Liabilities and Shareholders' Equity $ 3,477,659 $ 3,389,125 $ 2,927,345 Bridgewater Bancshares, Inc. and Subsidiaries Consolidated Statements of Income (dollars in thousands, except per share data) Three Months Ended Year Ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 (Unaudited) (Unaudited) (Unaudited) (Unaudited) INTEREST INCOME Loans, Including Fees $ 31,140 $ 31,049 $ 28,242 $ 118,845 $ 105,492 Investment Securities 2,511 2,333 2,333 9,576 8,720 Other 124 135 124 458 614 Total Interest Income 33,775 33,517 30,699 128,879 114,826 INTEREST EXPENSE Deposits 3,241 3,417 4,079 13,842 19,813 Notes Payable — — 105 61 439 FHLB Advances 162 213 551 831 3,390 Subordinated Debentures 1,219 1,214 1,119 4,630 3,109 Federal Funds Purchased — — 4 6 111 Total Interest Expense 4,622 4,844 5,858 19,370 26,862 NET INTEREST INCOME 29,153 28,673 24,841 109,509 87,964 Provision for Loan Losses 1,150 1,300 3,900 5,150 12,750 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 28,003 27,373 20,941 104,359 75,214 NONINTEREST INCOME Customer Service Fees 274 268 251 1,007 826 Net Gain on Sales of Available for Sale Securities — 48 30 750 1,503 Other Income 1,014 1,094 705 3,552 3,510 Total Noninterest Income 1,288 1,410 986 5,309 5,839 NONINTEREST EXPENSE Salaries and Employee Benefits 7,966 8,309 6,216 30,889 25,568 Occupancy and Equipment 939 942 979 3,916 3,258 Other Expense 3,554 3,985 8,063 13,290 16,561 Total Noninterest Expense 12,459 13,236 15,258 48,095 45,387 INCOME BEFORE INCOME TAXES 16,832 15,547 6,669 61,573 35,666 Provision for Income Taxes 4,318 4,038 1,690 15,886 8,472 NET INCOME 12,514 11,509 4,979 45,687 27,194 Preferred Stock Dividends 1,171 — — 1,171 — NET INCOME TO COMMON SHAREHOLDERS $ 11,343 $ 11,509 $ 4,979 $ 44,516 $ 27,194 EARNINGS PER SHARE Basic $ 0.41 $ 0.41 $ 0.18 $ 1.59 $ 0.95 Diluted 0.39 0.40 0.17 1.54 0.93 Dividends Paid Per Common Share — — — — — Bridgewater Bancshares, Inc. and Subsidiaries Analysis of Average Balances, Yields and Rates (dollars in thousands, except per share data) For the Year Ended December 31, 2021 December 31, 2020 Average Interest Yield/ Average Interest Yield/ Balance & Fees Rate Balance & Fees Rate (dollars in thousands) Interest Earning Assets: Cash Investments $ 132,188 $ 199 0.15 % $ 80,113 $ 170 0.21 % Investment Securities: Taxable Investment Securities 317,954 7,015 2.21 234,873 5,712 2.43 Tax-Exempt Investment Securities (1) 75,313 3,242 4.30 87,587 3,807 4.35 Total Investment Securities 393,267 10,257 2.61 322,460 9,519 2.95 Paycheck Protection Program Loans (2) 103,151 6,441 6.24 122,240 4,143 3.39 Loans (1)(2) 2,481,706 112,587 4.54 2,032,180 101,469 4.99 Total Loans 2,584,857 119,028 4.60 2,154,420 105,612 4.90 Federal Home Loan Bank Stock 5,571 259 4.65 8,866 444 5.01 Total Interest Earning Assets 3,115,883 129,743 4.16 % 2,565,859 115,745 4.51 % Noninterest Earning Assets 73,917 51,720 Total Assets $ 3,189,800 $ 2,617,579 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 441,528 $ 2,052 0.46 % $ 295,036 $ 1,626 0.55 % Savings and Money Market Deposits 773,779 3,729 0.48 523,520 5,341 1.02 Time Deposits 323,638 4,099 1.27 374,195 7,806 2.09 Brokered Deposits 406,863 3,962 0.97 348,126 5,040 1.45 Total Interest Bearing Deposits 1,945,808 13,842 0.71 1,540,877 19,813 1.29 Federal Funds Purchased 2,479 6 0.24 7,239 111 1.53 Notes Payable 1,658 61 3.66 11,749 439 3.73 FHLB Advances 53,294 831 1.56 148,524 3,390 2.28 Subordinated Debentures 82,865 4,630 5.59 50,954 3,109 6.10 Total Interest Bearing Liabilities 2,086,104 19,370 0.93 % 1,759,343 26,862 1.53 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 764,087 579,595 Other Noninterest Bearing Liabilities 23,372 19,905 Total Noninterest Bearing Liabilities 787,459 599,500 Shareholders' Equity 316,237 258,736 Total Liabilities and Shareholders' Equity $ 3,189,800 $ 2,617,579 Net Interest Income / Interest Rate Spread 110,373 3.23 % 88,883 2.98 % Net Interest Margin (3) 3.54 % 3.46 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities (864 ) (919 ) Net Interest Income $ 109,509 $ 87,964 _________________________________ (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 Year Ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 Pre-Provision Net Revenue Noninterest Income $ 1,288 $ 1,410 $ 986 $ 5,309 $ 5,839 Less: Gain on sales of Securities — (48 ) (30 ) (750 ) (1,503 ) Total Operating Noninterest Income 1,288 1,362 956 4,559 4,336 Plus: Net Interest Income 29,153 28,673 24,841 109,509 87,964 Net Operating Revenue $ 30,441 $ 30,035 $ 25,797 $ 114,068 $ 92,300 Noninterest Expense $ 12,459 $ 13,236 $ 15,258 $ 48,095 $ 45,387 Less: Amortization of Tax Credit Investments (152 ) (152 ) (146 ) (562 ) (738 ) Less: Debt Prepayment Fees — (582 ) (5,613 ) (582 ) (7,043 ) Total Operating Noninterest Expense $ 12,307 $ 12,502 $ 9,499 $ 46,951 $ 37,606 Pre-Provision Net Revenue $ 18,134 $ 17,533 $ 16,298 $ 67,117 $ 54,694 Plus: Non-Operating Revenue Adjustments — 48 30 750 1,503 Less: Provision for Loan Losses 1,150 1,300 3,900 5,150 12,750 Non-Operating Expense Adjustments 152 734 5,759 1,144 7,781 Provision for Income Taxes 4,318 4,038 1,690 15,886 8,472 Net Income $ 12,514 $ 11,509 $ 4,979 $ 45,687 $ 27,194 Average Assets $ 3,403,270 $ 3,332,301 $ 2,816,032 $ 3,189,800 $ 2,617,579 Pre-Provision Net Revenue Return on Average Assets 2.11 % 2.09 % 2.30 % 2.10 % 2.09 % As of and for the Three Months Ended As of and for the Year Ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 Core Net Interest Margin Net Interest Income (Tax-Equivalent Basis) $ 29,388 $ 28,880 $ 25,051 $ 110,373 $ 88,883 Less: Loan Fees (1,462 ) (1,487 ) (1,514 ) (5,173 ) (5,283 ) Less: PPP Interest and Fees (1,057 ) (1,753 ) (2,097 ) (6,441 ) (4,143 ) Core Net Interest Income $ 26,869 $ 25,640 $ 21,440 $ 98,759 $ 79,457 Average Interest Earning Assets 3,320,603 3,234,301 2,759,543 3,115,883 2,565,859 Less: Average PPP Loans (39,900 ) (76,006 ) (165,099 ) (103,151 ) (122,240 ) Core Average Interest Earning Assets $ 3,280,703 $ 3,158,295 $ 2,594,444 $ 3,012,732 $ 2,443,619 Core Net Interest Margin 3.25 % 3.22 % 3.29 % 3.28 % 3.25 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended For the Year Ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 Efficiency Ratio Noninterest Expense $ 12,459 $ 13,236 $ 15,258 $ 48,095 $ 45,387 Less: Amortization of Intangible Assets (48 ) (48 ) (48 ) (191 ) (191 ) Adjusted Noninterest Expense $ 12,411 $ 13,188 $ 15,210 $ 47,904 $ 45,196 Net Interest Income $ 29,153 $ 28,673 $ 24,841 $ 109,509 $ 87,964 Noninterest Income 1,288 1,410 986 5,309 5,839 Less: Gain on Sales of Securities — (48 ) (30 ) (750 ) (1,503 ) Adjusted Operating Revenue $ 30,441 $ 30,035 $ 25,797 $ 114,068 $ 92,300 Efficiency Ratio 40.8 % 43.9 % 59.0 % 42.0 % 49.0 % Adjusted Efficiency Ratio Noninterest Expense $ 12,459 $ 13,236 $ 15,258 $ 48,095 $ 45,387 Less: Amortization of Tax Credit Investments (152 ) (152 ) (146 ) (562 ) (738 ) Less: Debt Prepayment Fees — (582 ) (5,613 ) (582 ) (7,043 ) Less: Amortization of Intangible Assets (48 ) (48 ) (48 ) (191 ) (191 ) Adjusted Noninterest Expense $ 12,259 $ 12,454 $ 9,451 $ 46,760 $ 37,415 Net Interest Income $ 29,153 $ 28,673 $ 24,841 $ 109,509 $ 87,964 Noninterest Income 1,288 1,410 986 5,309 5,839 Less: Gain on Sales of Securities — (48 ) (30 ) (750 ) (1,503 ) Adjusted Operating Revenue $ 30,441 $ 30,035 $ 25,797 $ 114,068 $ 92,300 Adjusted Efficiency Ratio 40.3 % 41.5 % 36.6 % 41.0 % 40.5 % For the Three Months Ended For the Year Ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 Adjusted Noninterest Expense to Average Assets (Annualized) Noninterest Expense $ 12,459 $ 13,236 $ 15,258 $ 48,095 $ 45,387 Less: Amortization of Tax Credit Investments (152 ) (152 ) (146 ) (562 ) (738 ) Less: Debt Prepayment Fees — (582 ) (5,613 ) (582 ) (7,043 ) Adjusted Noninterest Expense $ 12,307 $ 12,502 $ 9,499 $ 46,951 $ 37,606 Average Assets $ 3,403,270 $ 3,332,301 $ 2,816,032 $ 3,189,800 $ 2,617,579 Adjusted Noninterest Expense to Average Assets (Annualized) 1.43 % 1.49 % 1.34 % 1.47 % 1.44 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) As of and for the Three Months Ended As of and for the Year Ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 Tangible Common Equity and Tangible Common Equity/Tangible Assets Total Shareholders' Equity $ 379,272 $ 367,803 $ 265,405 Less: Preferred Stock (66,514 ) (66,515 ) — Total Common Shareholders' Equity 312,758 301,288 265,405 Less: Intangible Assets (3,105 ) (3,153 ) (3,296 ) Tangible Common Equity $ 309,653 $ 298,135 $ 262,109 Total Assets $ 3,477,659 $ 3,389,125 $ 2,927,345 Less: Intangible Assets (3,105 ) (3,153 ) (3,296 ) Tangible Assets $ 3,474,554 $ 3,385,972 $ 2,924,049 Tangible Common Equity/Tangible Assets 8.91 % 8.81 % 8.96 % Tangible Book Value Per Share Book Value Per Common Share $ 11.09 $ 10.73 $ 9.43 Less: Effects of Intangible Assets (0.11 ) (0.11 ) (0.12 ) Tangible Book Value Per Common Share $ 10.98 $ 10.62 $ 9.31 Return on Average Tangible Common Equity Net Income Available to Common Shareholders $ 11,343 $ 11,509 $ 4,979 $ 44,516 $ 27,194 Average Shareholders' Equity $ 374,035 $ 330,604 $ 265,716 $ 316,237 $ 258,736 Less: Average Preferred Stock (66,515 ) (32,332 ) — (24,915 ) — Average Common Equity 307,520 298,272 265,716 291,322 258,736 Less: Effects of Average Intangible Assets (3,132 ) (3,180 ) (3,323 ) (3,204 ) (3,395 ) Average Tangible Common Equity $ 304,388 $ 295,092 $ 262,393 $ 288,118 $ 255,341 Return on Average Tangible Common Equity 14.78 % 15.47 % 7.55 % 15.45 % 10.65 % Three Months Ended December 31, September 30, June 30, March 31, December 31, 2021 2021 2021 2021 2020 Tangible Common Equity Total Shareholders' Equity $ 379,272 $ 367,803 $ 290,830 $ 279,171 $ 265,405 Less: Preferred Stock (66,514 ) (66,515 ) — — — Common Shareholders' Equity 312,758 301,288 290,830 279,171 265,405 Less: Intangible Assets (3,105 ) (3,153 ) (3,200 ) (3,248 ) (3,296 ) Tangible Common Equity $ 309,653 $ 298,135 $ 287,630 $ 275,923 $ 262,109 As of and for the Three Months Ended As of and for the Year Ended December 31, 2021 September 30, 2021 December 31, 2020 December 31, 2021 December 31, 2020 Adjusted Diluted Earnings Per Common Share Net Income Available to Common Shareholders $ 11,343 $ 11,509 $ 4,979 $ 44,516 $ 27,194 Add: Debt Prepayment Fees — 582 5,613 582 7,043 Less: Tax Impact — (151 ) (1,336 ) (151 ) (1,676 ) Net Income, Excluding Impact of Debt Prepayment Fees $ 11,343 $ 11,940 $ 9,256 $ 44,947 $ 32,561 Diluted Weighted Average Shares Outstanding 29,038,785 29,110,547 28,823,384 28,968,286 29,170,220 Adjusted Diluted Earnings Per Common Share $ 0.39 $ 0.41 $ 0.32 $ 1.55 $ 1.12 View source version on businesswire.com: https://www.businesswire.com/news/home/20220126005633/en/Contacts Investor Relations Contact: 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 $12.5 million for the fourth quarter of 2021, an 8.7% increase over net income of $11.5 million for the third quarter of 2021, and a 151.3% increase over net income of $5.0 million for the fourth quarter of 2020. Net income per diluted common share for the fourth quarter of 2021 was $0.39, a 1.2% decrease compared to $0.40 per diluted common share for the third quarter of 2021, and a 126.1% increase compared to $0.17 per diluted common share for the same period in 2020. “Bridgewater reported a fourth consecutive quarter of record net income driven by the continuation of many of the same trends and momentum we created throughout 2021,” said Chairman, Chief Executive Officer, and President, Jerry Baack. “During the quarter, we continued to generate strong loan production and gather high-quality deposits across the Twin Cities market, leading to robust balance sheet growth. This level of consistent growth in today’s environment, along with a business model operating with a low 40% adjusted efficiency ratio, stable net interest margin and strong asset quality, remain key differentiators for us. As we look ahead to 2022, we expect to continue to leverage the ongoing M&A-related market disruption and our strengthening brand to drive additional balance sheet and revenue growth; make proactive investments in business scalability, automation and back-office functions; and maintain our highly efficient operating strategy. With a hard-working team of talented professionals supporting our clients every day and a strong capital and liquidity position, we are poised to build on our momentum into 2022 and beyond.” The Company today also announced that its Board of Directors declared a quarterly cash dividend on its 5.875% Non-Cumulative Perpetual Preferred Stock, Series A ("Series A Preferred Stock"). The quarterly cash dividend of $36.72 per share, equivalent to $0.3672 per depositary share, each representing a 1/100th interest in a share of the Series A Preferred Stock (Nasdaq: BWBBP), is payable on March 1, 2022 to shareholders of record of the Series A Preferred Stock at the close of business on February 15, 2022. Fourth Quarter 2021 Financial Results Diluted Nonperforming Adjusted ROA PPNR ROA (1) ROE earnings per share assets to total assets efficiency ratio (1) 1.46 % 2.11 % 13.27 % $ 0.39 0.02 % 40.3 % _________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. Fourth Quarter 2021 Highlights Diluted earnings per common share were $0.39 for the fourth quarter of 2021, compared to $0.40 per common share for the third quarter of 2021. Payment of the Company’s first quarterly preferred stock dividend negatively impacted diluted earnings per common share by $0.04 in the fourth quarter of 2021, compared to no preferred stock dividend payment in the third quarter of 2021. Annualized return on average assets (ROA) and annualized return on average shareholders’ equity (ROE) for the fourth quarter of 2021 were 1.46% and 13.27%, compared to ROA and ROE of 1.37% and 13.81%, respectively, for the third quarter of 2021. Annualized return on average tangible common equity, a non-GAAP financial measure, was 14.78% for the fourth quarter of 2021, compared to 15.47% for the third quarter of 2021. Pre-provision net revenue (PPNR), a non-GAAP financial measure, was $18.1 million for the fourth quarter of 2021, compared to $17.5 million for the third quarter of 2021. PPNR ROA, a non-GAAP financial measure, was 2.11% for the fourth quarter of 2021, compared to 2.09% for the third quarter of 2021. Gross loans increased $107.5 million in the fourth quarter of 2021, or 15.7% annualized, compared to the third quarter of 2021. Gross loans, excluding Paycheck Protection Program (PPP) loans, increased $135.5 million in the fourth quarter of 2021, or 20.2% annualized, compared to the third quarter of 2021. Deposits increased $92.1 million in the fourth quarter of 2021, or 12.8% annualized, compared to the third quarter of 2021. Net interest margin (on a fully tax-equivalent basis) was 3.51% for the fourth quarter of 2021, compared to 3.54% in the third quarter of 2021. 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, expanded 3 basis points from 3.22% in the third quarter of 2021 to 3.25% in the fourth 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 40.3% for the fourth quarter of 2021, compared to 41.5% for the third quarter of 2021. A loan loss provision of $1.2 million was recorded in the fourth quarter of 2021 to support strong organic loan growth. The allowance for loan losses to total loans was 1.42% at December 31, 2021, compared to 1.43% at September 30, 2021. The allowance for loan losses to total loans, excluding PPP loans, was 1.43% at December 31, 2021, compared to 1.46% at September 30, 2021. Annualized net loan charge-offs as a percentage of average loans were 0.00% for both the fourth quarter of 2021, and the third quarter of 2021. Tangible book value per share, a non-GAAP financial measure, increased $0.36, or 13.6% annualized, to $10.98 at December 31, 2021, compared to $10.62 at September 30, 2021. Annual 2021 Highlights Diluted earnings per common share for the year ended December 31, 2021 were $1.54, a 64.8% increase, compared to $0.93 for the year ended December 31, 2020. PPNR, a non-GAAP financial measure, was $67.1 million for the year ended December 31, 2021, an increase of 22.7%, compared to $54.7 million for the year ended December 31, 2020. PPNR ROA, a non-GAAP financial measure, was 2.10% for the year ended December 31, 2021, compared to 2.09% for the year ended December 31, 2020. Gross loans increased $493.0 million at December 31, 2021, or 21.2%, compared to December 31, 2020. Excluding PPP loans, gross loans increased 27.7%, at December 31, 2021, compared to December 31, 2020. Deposits increased $444.6 million at December 31, 2021, or 17.8%, compared to December 31, 2020. Net interest margin (on a fully tax-equivalent basis) was 3.54% for the year ended December 31, 2021, compared to 3.46% for the year ended December 31, 2020. Core net interest margin (on a fully tax-equivalent basis), a non-GAAP financial measure, for the year ended December 31, 2021 was 3.28%, compared to 3.25% for the year ended December 31, 2020. The adjusted efficiency ratio, a non-GAAP financial measure, was 41.0% for the year ended December 31, 2021, compared to 40.5% for the year ended December 31, 2020. Net loan charge-offs as a percentage of average loans were 0.00% for the year ended December 31, 2021, compared to 0.02% for the year ended December 31, 2020. The ratio of nonperforming assets to total assets was 0.02% at December 31, 2021, compared to 0.03% at December 31, 2020. Tangible book value per share, a non-GAAP financial measure, increased 17.9%, or $1.66, to $10.98 at December 31, 2021, compared to $9.31 at December 31, 2020. Key Financial Measures As of and for the Three Months Ended As of and for the Year Ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 Per Common Share Data Basic Earnings Per Share $ 0.41 $ 0.41 $ 0.18 $ 1.59 $ 0.95 Diluted Earnings Per Share 0.39 0.40 0.17 1.54 0.93 Adjusted Diluted Earnings Per Share (1) 0.39 0.41 0.32 1.55 1.12 Book Value Per Share 11.09 10.73 9.43 Tangible Book Value Per Share (1) 10.98 10.62 9.31 Basic Weighted Average Shares Outstanding 28,004,334 28,047,280 28,179,768 28,027,454 28,582,064 Diluted Weighted Average Shares Outstanding 29,038,785 29,110,547 28,823,384 28,968,286 29,170,220 Shares Outstanding at Period End 28,206,566 28,066,822 28,143,493 Selected Performance Ratios Return on Average Assets (Annualized) 1.46 % 1.37 % 0.70 % 1.43 % 1.04 % Pre-Provision Net Revenue Return on Average Assets (Annualized) (1) 2.11 2.09 2.30 2.10 2.09 Return on Average Shareholders' Equity (Annualized) 13.27 13.81 7.45 14.45 10.51 Return on Average Tangible Common Equity (Annualized) (1) 14.78 15.47 7.55 15.45 10.65 Yield on Interest Earning Assets 4.06 4.14 4.46 4.16 4.51 Yield on Total Loans, Gross 4.49 4.65 4.89 4.60 4.90 Cost of Interest Bearing Liabilities 0.86 0.88 1.24 0.93 1.53 Cost of Total Deposits 0.45 0.48 0.69 0.51 0.93 Net Interest Margin (2) 3.51 3.54 3.61 3.54 3.46 Core Net Interest Margin (1)(2) 3.25 3.22 3.29 3.28 3.25 Efficiency Ratio (1) 40.8 43.9 59.0 42.0 49.0 Adjusted Efficiency Ratio (1) 40.3 41.5 36.6 41.0 40.5 Noninterest Expense to Average Assets (Annualized) 1.45 1.58 2.16 1.51 1.73 Adjusted Noninterest Expense to Average Assets (Annualized) (1) 1.43 1.49 1.34 1.47 1.44 Loan to Deposit Ratio 95.7 95.0 93.0 Core Deposits to Total Deposits (3) 85.4 83.3 78.1 Tangible Common Equity to Tangible Assets (1) 8.91 8.81 8.96 Capital Ratios (Bank Only) (4) Tier 1 Leverage Ratio 11.09 % 10.96 % 10.89 % Common Equity Tier 1 Risk-based Capital Ratio 11.69 11.88 12.12 Tier 1 Risk-based Capital Ratio 11.69 11.88 12.12 Total Risk-based Capital Ratio 12.94 13.13 13.37 Capital Ratios (Consolidated) (4) Tier 1 Leverage Ratio 10.82 % 10.70 % 9.28 % Common Equity Tier 1 Risk-based Capital Ratio 9.36 9.47 10.35 Tier 1 Risk-based Capital Ratio 11.43 11.65 10.35 Total Risk-based Capital Ratio 15.55 15.93 14.58 _________________________________ (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 December 31, September 30, June 30, March 31, December 31, (dollars in thousands) 2021 2021 2021 2021 2020 Selected Balance Sheet Data Total Assets $ 3,477,659 $ 3,389,125 $ 3,162,612 $ 3,072,359 $ 2,927,345 Total Loans, Gross 2,819,472 2,712,012 2,594,186 2,426,123 2,326,428 Allowance for Loan Losses 40,020 38,901 37,591 35,987 34,841 Goodwill and Other Intangibles 3,105 3,153 3,200 3,248 3,296 Deposits 2,946,237 2,854,157 2,720,906 2,638,654 2,501,636 Tangible Common Equity (1) 309,653 298,135 287,630 275,923 262,109 Total Shareholders' Equity 379,272 367,803 290,830 279,171 265,405 Average Total Assets - Quarter-to-Date 3,403,270 3,332,301 3,076,712 2,940,262 2,816,032 Average Shareholders' Equity - Quarter-to-Date 374,035 330,604 286,311 272,729 265,716 _________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. For the Three Months Ended For the Year Ended December 31, September 30, December 31, December 31, December 31, (dollars in thousands) 2021 2021 2020 2021 2020 Selected Income Statement Data Interest Income $ 33,775 $ 33,517 $ 30,699 $ 128,879 $ 114,826 Interest Expense 4,622 4,844 5,858 19,370 26,862 Net Interest Income 29,153 28,673 24,841 109,509 87,964 Provision for Loan Losses 1,150 1,300 3,900 5,150 12,750 Net Interest Income after Provision for Loan Losses 28,003 27,373 20,941 104,359 75,214 Noninterest Income 1,288 1,410 986 5,309 5,839 Noninterest Expense 12,459 13,236 15,258 48,095 45,387 Income Before Income Taxes 16,832 15,547 6,669 61,573 35,666 Provision for Income Taxes 4,318 4,038 1,690 15,886 8,472 Net Income 12,514 11,509 4,979 45,687 27,194 Preferred Stock Dividends (1,171 ) — — (1,171 ) — Net Income Available to Common Shareholders $ 11,343 $ 11,509 $ 4,979 $ 44,516 $ 27,194 Income Statement Net Interest Income Net interest income was $29.2 million for the fourth quarter of 2021, an increase of $480,000, or 1.7%, from $28.7 million in the third quarter of 2021, and an increase of $4.3 million, or 17.4%, from $24.8 million in the fourth 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 and lower rates paid on deposits, offset partially by declining yields on loans. Average interest earning assets were $3.32 billion for the fourth quarter of 2021, an increase of $86.3 million, or 2.7%, from $3.23 billion for the third quarter of 2021, and an increase of $561.1 million, or 20.3%, from $2.76 billion for the fourth quarter of 2020. The linked-quarter increase in average interest earning assets was primarily due to continued strong organic growth in the loan portfolio, offset partially by the payoff of PPP loans and the reduction of cash balances. The year-over-year increase in average interest earning assets was primarily due to increased cash balances, continued purchases of investment securities, and strong organic growth in the loan portfolio, offset partially by the payoff of PPP loans. Net interest margin (on a fully tax-equivalent basis) for the fourth quarter of 2021 was 3.51%, a 3 basis point decrease from 3.54% in the third quarter of 2021, and a 10 basis point decrease from 3.61% in the fourth 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 fourth quarter of 2021 was 3.25%, a 3 basis point increase from 3.22% in the third quarter of 2021, and a 4 basis point decline from 3.29% in the fourth quarter of 2020. As the PPP loan portfolio pays down, the recognition of fees associated with the originations has benefited net interest margin for each of the past four quarters. The SBA has been forgiving PPP loans, which has accelerated the recognition of PPP fees starting in the fourth quarter of 2020 and continuing through the fourth quarter of 2021. The Company recognized $958,000 of PPP origination fees during the fourth quarter of 2021, compared to $1.6 million during the third quarter of 2021. The elevated fee recognition is illustrated in the 10.51% PPP loan yield for the fourth quarter of 2021, compared to 9.15% for the third quarter of 2021. Remaining PPP origination fees to be recognized as of December 31, 2021 were $898,000. The following table summarizes PPP loan originations and net origination fees as of December 31, 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 17 $ 1,109 $ 5,706 $ 5,698 Round Two PPP Loans 651 78,386 136 25,053 3,544 2,654 Totals 1,851 $ 259,986 153 $ 26,162 $ 9,250 $ 8,352 Interest income was $33.8 million for the fourth quarter of 2021, an increase of $258,000, or 0.8%, from $33.5 million in the third quarter of 2021, and an increase of $3.1 million, or 10.0%, from $30.7 million in the fourth quarter of 2020. The yield on interest earning assets (on a fully tax-equivalent basis) was 4.06% in the fourth quarter of 2021, compared to 4.14% in the third quarter of 2021, and 4.46% in the fourth 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 core loan yield, as well as lower PPP origination fees recognized during the period. The year-over-year decline in the yield on interest earning assets was primarily due to excess cash balances and 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 4.41% in the fourth quarter of 2021, which was 10 basis points lower than 4.51% in the third quarter of 2021, and 46 basis points lower than 4.87% in the fourth 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 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 Interest 4.20 % 4.28 % 4.37 % 4.50 % 4.59 % Fees 0.21 0.23 0.17 0.22 0.28 Yield on Loans, Excluding PPP Loans 4.41 % 4.51 % 4.54 % 4.72 % 4.87 % Interest expense was $4.6 million for the fourth quarter of 2021, a decrease of $222,000, or 4.6%, from $4.8 million in the third quarter of 2021, and a decrease of $1.2 million, or 21.1%, from $5.9 million in the fourth quarter of 2020. The cost of interest bearing liabilities declined 2 basis points on a linked-quarter basis from 0.88% in the third quarter of 2021 to 0.86% in the fourth quarter of 2021, primarily due to lower rates paid on deposits. On a year-over-year basis, the cost of interest bearing liabilities decreased 38 basis points from 1.24% in the fourth quarter of 2020 to 0.86% in the fourth 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 $3.2 million for the fourth quarter of 2021, a decrease of $176,000, or 5.2%, from $3.4 million in the third quarter of 2021, and a decrease of $838,000, or 20.5%, from $4.1 million in the fourth quarter of 2020. The cost of total deposits declined 3 basis points on a linked-quarter basis from 0.48% in the third quarter of 2021, and declined 24 basis points on a year-over-year basis from 0.69% in the fourth quarter of 2020, to 0.45% in the fourth quarter of 2021, primarily due to deposit rate cuts consistent with a lower rate environment and the continued downward repricing of time deposits. A summary of the Company’s average balances, interest yields and rates, and net interest margin for the three months ended December 31, 2021, September 30, 2021, and December 31, 2020 is as follows: For the Three Months Ended December 31, 2021 September 30, 2021 December 31, 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 $ 146,744 $ 65 0.18 % $ 187,405 $ 67 0.14 % $ 79,896 $ 32 0.16 % Investment Securities: Taxable Investment Securities 341,325 1,893 2.20 314,367 1,751 2.21 290,093 1,632 2.24 Tax-Exempt Investment Securities (1) 71,602 782 4.33 71,801 737 4.07 81,370 888 4.34 Total Investment Securities 412,927 2,675 2.57 386,168 2,488 2.56 371,463 2,520 2.70 Paycheck Protection Program Loans (2) 39,900 1,057 10.51 76,006 1,753 9.15 165,099 2,097 5.05 Loans (1)(2) 2,715,722 30,154 4.41 2,579,021 29,348 4.51 2,136,229 26,168 4.87 Total Loans 2,755,622 31,211 4.49 2,655,027 31,101 4.65 2,301,328 28,265 4.89 Federal Home Loan Bank Stock 5,310 59 4.39 5,701 68 4.65 6,856 92 5.35 Total Interest Earning Assets 3,320,603 34,010 4.06 % 3,234,301 33,724 4.14 % 2,759,543 30,909 4.46 % Noninterest Earning Assets 82,667 98,000 56,489 Total Assets $ 3,403,270 $ 3,332,301 $ 2,816,032 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 499,475 $ 548 0.43 % $ 479,580 $ 562 0.47 % $ 353,806 $ 420 0.47 % Savings and Money Market Deposits 803,848 876 0.43 801,354 904 0.45 538,030 1,003 0.74 Time Deposits 299,823 830 1.10 318,222 928 1.16 362,469 1,607 1.76 Brokered Deposits 404,438 987 0.97 440,167 1,023 0.92 433,037 1,049 0.96 Total Interest Bearing Deposits 2,007,584 3,241 0.64 2,039,323 3,417 0.66 1,687,342 4,079 0.96 Federal Funds Purchased 10 — 0.67 — — — 4,072 4 0.33 Notes Payable — — — — — — 11,000 105 3.77 FHLB Advances 44,185 162 1.46 54,130 213 1.56 99,196 551 2.21 Subordinated Debentures 92,189 1,219 5.25 91,337 1,214 5.27 73,696 1,119 6.04 Total Interest Bearing Liabilities 2,143,968 4,622 0.86 % 2,184,790 4,844 0.88 % 1,875,306 5,858 1.24 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 861,473 784,148 654,299 Other Noninterest Bearing Liabilities 23,794 32,759 20,711 Total Noninterest Bearing Liabilities 885,267 816,907 675,010 Shareholders' Equity 374,035 330,604 265,716 Total Liabilities and Shareholders' Equity $ 3,403,270 $ 3,332,301 $ 2,816,032 Net Interest Income / Interest Rate Spread 29,388 3.20 % 28,880 3.26 % 25,051 3.22 % Net Interest Margin (3) 3.51 % 3.54 % 3.61 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities and Loans (235 ) (207 ) (210 ) Net Interest Income $ 29,153 $ 28,673 $ 24,841 _________________________________ (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 $1.2 million for the fourth quarter of 2021, a decrease of $150,000 from $1.3 million for the third quarter of 2021, and a decrease of $2.8 million from $3.9 million for the fourth quarter of 2020. The provision recorded in the fourth quarter of 2021 was primarily attributable to growth of the loan portfolio. The allowance for loan losses to total loans was 1.42% at December 31, 2021, compared to 1.43% at September 30, 2021, and 1.50% at December 31, 2020. The allowance for loan losses to total loans, excluding PPP loans, was 1.43% at December 31, 2021, compared to 1.46% at September 30, 2021, and 1.59% at December 31, 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 Year Ended December 31, September 30, December 31, December 31, December 31, (dollars in thousands) 2021 2021 2020 2021 2020 Balance at Beginning of Period $ 38,901 $ 37,591 $ 31,381 $ 34,841 $ 22,526 Provision for Loan Losses 1,150 1,300 3,900 5,150 12,750 Charge-offs (37 ) (20 ) (463 ) (74 ) (517 ) Recoveries 6 30 23 103 82 Balance at End of Period $ 40,020 $ 38,901 $ 34,841 $ 40,020 $ 34,841 Noninterest Income Noninterest income was $1.3 million for the fourth quarter of 2021, a decrease of $122,000 from $1.4 million for the third quarter of 2021, and an increase of $302,000 from $986,000 for the fourth quarter of 2020. The linked-quarter decrease was primarily due to decreased gains on sales of securities and letter of credit fees. The year-over-year increase was primarily due to increased letter of credit fees and bank-owned life insurance income. The following table presents the major components of noninterest income for the periods indicated: Three Months Ended Year Ended December 31, September 30, December 31, December 31, December 31, (dollars in thousands) 2021 2021 2020 2021 2020 Noninterest Income: Customer Service Fees $ 274 $ 268 $ 251 $ 1,007 $ 826 Net Gain on Sales of Securities — 48 30 750 1,503 Letter of Credit Fees 541 577 477 1,676 1,503 Debit Card Interchange Fees 149 143 118 563 428 Swap Fees — — — — 907 Bank-Owned Life Insurance 150 166 — 316 — Other Income 174 208 110 997 672 Totals $ 1,288 $ 1,410 $ 986 $ 5,309 $ 5,839 Noninterest Expense Noninterest expense was $12.5 million for the fourth quarter of 2021, a decrease of $777,000 from $13.2 million for the third quarter of 2021, and a decrease of $2.8 million from $15.3 million for the fourth quarter of 2020. The linked-quarter decrease was primarily due to lower salaries and employee benefits related to higher bonus accruals in the third quarter of 2021, and $582,000 of debt prepayment fees associated with a partial early redemption of $11.3 million of subordinated debentures issued in July 2017 that occurred in the third quarter of 2021. The year-over-year decrease was primarily attributable to $5.6 million of debt prepayment fees associated with the early extinguishment of $69.0 million of FHLB term advances incurred in the fourth quarter of 2020, partially offset by an increase in salaries and employee benefits, and marketing and advertising expenses. The following table presents the major components of noninterest expense for the periods indicated: Three Months Ended Year Ended December 31, September 30, December 31, December 31, December 31, (dollars in thousands) 2021 2021 2020 2021 2020 Noninterest Expense: Salaries and Employee Benefits $ 7,966 $ 8,309 $ 6,216 $ 30,889 $ 25,568 Occupancy and Equipment 939 942 979 3,916 3,258 FDIC Insurance Assessment 345 355 270 1,305 788 Data Processing 306 325 293 1,222 1,027 Professional and Consulting Fees 719 708 566 2,523 1,966 Information Technology and Telecommunications 554 598 397 2,163 1,374 Marketing and Advertising 469 418 143 1,487 788 Intangible Asset Amortization 48 48 48 191 191 Amortization of Tax Credit Investments 152 152 146 562 738 Debt Prepayment Fees — 582 5,613 582 7,043 Other Expense 961 799 587 3,255 2,646 Totals $ 12,459 $ 13,236 $ 15,258 $ 48,095 $ 45,387 The Company continues to add key talent across the organization, reaching 220 full-time equivalent employees at December 31, 2021, compared to 219 employees at September 30, 2021, and 183 employees at December 31, 2020. The efficiency ratio, a non-GAAP financial measure, was 40.8% for the fourth quarter of 2021, compared to 43.9% for the third quarter of 2021, and 59.0% for the fourth quarter of 2020. Excluding the impact of certain non-routine income and expenses, the adjusted efficiency ratio, a non-GAAP financial measure, was 40.3% for the fourth quarter of 2021, 41.5% for the third quarter of 2021 and 36.6% for the fourth quarter of 2020. The efficiencies of the Company’s “branch-light” model have positioned the Company well, and going forward, provide 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 fourth quarter of 2021 was 25.7%, a decrease from 26.0% for the third quarter of 2021 and an increase from 25.3% for the fourth quarter of 2020. The effective combined federal and state income tax rate for the year ended December 31, 2021 was 25.8%, compared to 23.8% for the year ended December 31, 2020. Balance Sheet Total assets at December 31, 2021 were $3.48 billion, a 2.6% increase from $3.39 billion at September 30, 2021, and an 18.8% increase from $2.93 billion at December 31, 2020. The linked-quarter increase in total assets was primarily due to strong organic loan growth, offset partially by a 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 the continued purchases of investment securities. Total gross loans at December 31, 2021 were $2.82 billion, an increase of $107.5 million, or 4.0%, over total gross loans of $2.71 billion at September 30, 2021, and an increase of $493.0 million, or 21.2%, over total gross loans of $2.33 billion at December 31, 2020. The increase in the loan portfolio during the fourth quarter of 2021 was primarily due to growth in the construction and land development, multifamily and CRE nonowner occupied segments, offset partially by the payoff of PPP loans. When excluding PPP loans, gross loans grew $135.5 million during the fourth quarter of 2021, or 20.2% on an annualized basis. The Company's continued strong loan growth has been driven by the expansion of its talented lending teams, PPP-related new client acquisitions, the strong, growing brand of the Bank in the Twin Cities market and the M&A-related market disruption in the Twin Cities resulting in client and banker acquisition opportunities. The following table presents the dollar composition of the Company’s loan portfolio, by category, at the dates indicated: December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 (dollars in thousands) Commercial $ 360,169 $ 350,081 $ 321,474 $ 301,023 $ 304,220 Paycheck Protection Program 26,162 54,190 99,072 163,258 138,454 Construction and Land Development 281,474 257,167 251,573 193,372 170,217 Real Estate Mortgage: 1 - 4 Family Mortgage 305,317 290,535 277,943 294,964 294,479 Multifamily 910,243 865,172 790,275 665,415 626,465 CRE Owner Occupied 111,096 101,834 87,507 79,665 75,604 CRE Nonowner Occupied 818,569 786,271 758,101 720,396 709,300 Total Real Estate Mortgage Loans 2,145,225 2,043,812 1,913,826 1,760,440 1,705,848 Consumer and Other 6,442 6,762 8,241 8,030 7,689 Total Loans, Gross 2,819,472 2,712,012 2,594,186 2,426,123 2,326,428 Allowance for Loan Losses (40,020 ) (38,901 ) (37,591 ) (35,987 ) (34,841 ) Net Deferred Loan Fees (9,535 ) (10,199 ) (11,450 ) (11,273 ) (9,151 ) Total Loans, Net $ 2,769,917 $ 2,662,912 $ 2,545,145 $ 2,378,863 $ 2,282,436 Total deposits at December 31, 2021 were $2.95 billion, an increase of $92.1 million, or 3.2%, over total deposits of $2.85 billion at September 30, 2021, and an increase of $444.6 million, or 17.8%, over total deposits of $2.50 billion at December 31, 2020. Deposit growth in the fourth quarter of 2021 was primarily due to an increase in noninterest bearing and interest bearing transaction deposits and savings and money market deposits, offset partially by declines in time deposits and brokered 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 of the Bank in the Twin Cities market. However, given the prospect for higher interest rates, 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: December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 (dollars in thousands) Noninterest Bearing Transaction Deposits $ 875,084 $ 846,490 $ 758,023 $ 712,999 $ 671,903 Interest Bearing Transaction Deposits 544,789 488,785 432,123 433,344 366,290 Savings and Money Market Deposits 863,567 791,861 761,485 791,583 657,617 Time Deposits 293,474 309,824 321,857 344,581 353,543 Brokered Deposits 369,323 417,197 447,418 356,147 452,283 Total Deposits $ 2,946,237 $ 2,854,157 $ 2,720,906 $ 2,638,654 $ 2,501,636 Capital Total shareholders’ equity at December 31, 2021 was $379.3 million, an increase of $11.5 million, or 3.1%, over total shareholders’ equity of $367.8 million at September 30, 2021, and an increase of $113.9 million, or 42.9%, over total shareholders’ equity of $265.4 million at December 31, 2020. The linked-quarter increase was due to net income retained. The year-over-year increase was due to net income retained, the issuance of preferred stock and an increase in unrealized gains in the securities and derivatives portfolios. During the fourth quarter of 2021, the Company repurchased 3,320 shares of its common stock. Shares were repurchased at a weighted average price of $16.36 for a total of $54,000. The Company remains committed to maintaining strong capital levels while enhancing shareholder value as it strategically executes its stock repurchase program in this fluid economic environment. Tangible book value per share, a non-GAAP financial measure, was $10.98 as of December 31, 2021, an increase of 3.3% from $10.62 as of September 30, 2021, and an increase of 17.9% from $9.31 as of December 31, 2020. Tangible common equity as a percentage of tangible assets, a non-GAAP financial measure, was 8.91% at December 31, 2021, compared to 8.81% at September 30, 2021, and 8.96% at December 31, 2020. Asset Quality Annualized net charge-offs as a percent of average loans for both the third and fourth quarters of 2021 were 0.00%, compared to 0.08% for the fourth quarter of 2020. At December 31, 2021, the Company’s nonperforming assets, which include nonaccrual loans, loans past due 90 days and still accruing, and foreclosed assets, were $722,000, or 0.02% of total assets, as compared to $734,000, or 0.02% of total assets at September 30, 2021, and $775,000 or 0.03% of total assets at December 31, 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 December 31, 2021 totaled $49.3 million, compared to $67.4 million at September 30, 2021, and $44.8 million at December 31, 2020. 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 December 31, 2021 totaled $22.6 million, compared to $7.7 million at September 30, 2021, and $15.2 million at December 31, 2020. The linked-quarter increase to substandard loans was primarily due to the migration of two relationships previously listed as watch and both negatively impacted by the pandemic. Management continues to actively work with the borrowers and closely monitor substandard credits. The following table presents a summary of asset quality measurements at the dates indicated: As of and for the Three Months Ended December 31, September 30, June 30, March 31, December 31, (dollars in thousands) 2021 2021 2021 2021 2020 Selected Asset Quality Data Loans 30-89 Days Past Due $ 49 $ 18 $ — $ — $ 13 Loans 30-89 Days Past Due to Total Loans 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % Nonperforming Loans $ 722 $ 734 $ 761 $ 770 $ 775 Nonperforming Loans to Total Loans 0.03 % 0.03 % 0.03 % 0.03 % 0.03 % Foreclosed Assets $ — $ — $ — $ — $ — Nonaccrual Loans to Total Loans 0.03 % 0.03 % 0.03 % 0.03 % 0.03 % Nonaccrual Loans and Loans Past Due 90 Days and Still Accruing to Total Loans 0.03 0.03 0.03 0.03 0.03 Nonperforming Assets (1) $ 722 $ 734 $ 761 $ 770 $ 775 Nonperforming Assets to Total Assets (1) 0.02 % 0.02 % 0.02 % 0.03 % 0.03 % Allowance for Loan Losses to Total Loans 1.42 1.43 1.45 1.48 1.50 Allowance for Loan Losses to Total Loans, Excluding PPP Loans 1.43 1.46 1.50 1.59 1.59 Allowance for Loans Losses to Nonaccrual Loans 5,542.94 5,299.86 4,939.68 4,673.64 4,495.61 Net Loan Charge-Offs (Recoveries) (Annualized) to Average Loans 0.00 0.00 0.00 (0.01 ) 0.08 _________________________________ (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 12 modified loans totaling $35.0 million outstanding as of December 31, 2021, representing 1.3% of the total loan portfolio, excluding PPP loans, which is down slightly from $35.4 million at September 30, 2021. The following table presents a rollforward of loan modification activity, by modification type, from September 30, 2021 to December 31, 2021: (dollars in thousands) Interest-Only Extended Amortization Total Principal Balance - Beginning of Period $ 30,597 $ 4,764 $ 35,361 Modification Expired (468 ) — (468 ) Net Principal Advances (Payments) 120 (24 ) 96 Principal Balance - End of Period $ 30,249 $ 4,740 $ 34,989 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 $3.5 billion and seven branches as of December 31, 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 ongoing COVID-19 pandemic, including its effects on the economic environment, our clients and our operations, including due to supply chain disruptions, 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, including rising rates of inflation; 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, especially in light of recent excess liquidity at the Bank; 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; talent and labor shortages and high rates of employee turnover; 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, including from nonbank competitors such as credit unions and “fintech” companies; the effectiveness of our risk management framework; the commencement and outcome of litigation and other legal proceedings and regulatory actions against us; the impact of recent and future legislative and regulatory changes, including changes to federal and state corporate tax rates; interest rate risk, including the effects of anticipated rate increases by the Federal Reserve; 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. or state tax laws, regulations and guidance, including recent proposals to increase the federal corporate tax rate; 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) December 31, September 30, December 31, 2021 2021 2020 (Unaudited) (Unaudited) ASSETS Cash and Cash Equivalents $ 143,473 $ 189,502 $ 160,675 Bank-Owned Certificates of Deposit 1,876 1,877 2,860 Securities Available for Sale, at Fair Value 439,362 413,149 390,629 Loans, Net of Allowance for Loan Losses of $40,020 at December 31, 2021 (unaudited), $38,901 at September 30, 2021 (unaudited) and $34,841 at December 31, 2020 2,769,917 2,662,912 2,282,436 Federal Home Loan Bank (FHLB) Stock, at Cost 5,242 5,442 5,027 Premises and Equipment, Net 49,395 49,803 50,987 Accrued Interest 9,186 8,550 9,172 Goodwill 2,626 2,626 2,626 Other Intangible Assets, Net 479 527 670 Other Assets 56,103 54,737 22,263 Total Assets $ 3,477,659 $ 3,389,125 $ 2,927,345 LIABILITIES AND EQUITY LIABILITIES Deposits: Noninterest Bearing $ 875,084 $ 846,490 $ 671,903 Interest Bearing 2,071,153 2,007,667 1,829,733 Total Deposits 2,946,237 2,854,157 2,501,636 Notes Payable — — 11,000 FHLB Advances 42,500 47,500 57,500 Subordinated Debentures, Net of Issuance Costs 92,239 92,153 73,739 Accrued Interest Payable 1,409 1,656 1,615 Other Liabilities 16,002 25,856 16,450 Total Liabilities 3,098,387 3,021,322 2,661,940 SHAREHOLDERS' EQUITY Preferred Stock- $0.01 par value; Authorized 10,000,000 Preferred Stock - Issued and Outstanding 2,760,000 Series A shares ($25 liquidation preference) at December 31, 2021 (unaudited), 2,760,000 at September 30, 2021 (unaudited) and -0- at December 31, 2020 66,514 66,515 — Common Stock- $0.01 par value; Authorized 75,000,000 Common Stock - Issued and Outstanding 28,206,566 at December 31, 2021 (unaudited), 28,066,822 at September 30, 2021 (unaudited) and 28,143,493 at December 31, 2020 282 281 281 Additional Paid-In Capital 104,123 103,471 103,714 Retained Earnings 199,347 188,004 154,831 Accumulated Other Comprehensive Income 9,006 9,532 6,579 Total Shareholders' Equity 379,272 367,803 265,405 Total Liabilities and Shareholders' Equity $ 3,477,659 $ 3,389,125 $ 2,927,345 Bridgewater Bancshares, Inc. and Subsidiaries Consolidated Statements of Income (dollars in thousands, except per share data) Three Months Ended Year Ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 (Unaudited) (Unaudited) (Unaudited) (Unaudited) INTEREST INCOME Loans, Including Fees $ 31,140 $ 31,049 $ 28,242 $ 118,845 $ 105,492 Investment Securities 2,511 2,333 2,333 9,576 8,720 Other 124 135 124 458 614 Total Interest Income 33,775 33,517 30,699 128,879 114,826 INTEREST EXPENSE Deposits 3,241 3,417 4,079 13,842 19,813 Notes Payable — — 105 61 439 FHLB Advances 162 213 551 831 3,390 Subordinated Debentures 1,219 1,214 1,119 4,630 3,109 Federal Funds Purchased — — 4 6 111 Total Interest Expense 4,622 4,844 5,858 19,370 26,862 NET INTEREST INCOME 29,153 28,673 24,841 109,509 87,964 Provision for Loan Losses 1,150 1,300 3,900 5,150 12,750 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 28,003 27,373 20,941 104,359 75,214 NONINTEREST INCOME Customer Service Fees 274 268 251 1,007 826 Net Gain on Sales of Available for Sale Securities — 48 30 750 1,503 Other Income 1,014 1,094 705 3,552 3,510 Total Noninterest Income 1,288 1,410 986 5,309 5,839 NONINTEREST EXPENSE Salaries and Employee Benefits 7,966 8,309 6,216 30,889 25,568 Occupancy and Equipment 939 942 979 3,916 3,258 Other Expense 3,554 3,985 8,063 13,290 16,561 Total Noninterest Expense 12,459 13,236 15,258 48,095 45,387 INCOME BEFORE INCOME TAXES 16,832 15,547 6,669 61,573 35,666 Provision for Income Taxes 4,318 4,038 1,690 15,886 8,472 NET INCOME 12,514 11,509 4,979 45,687 27,194 Preferred Stock Dividends 1,171 — — 1,171 — NET INCOME TO COMMON SHAREHOLDERS $ 11,343 $ 11,509 $ 4,979 $ 44,516 $ 27,194 EARNINGS PER SHARE Basic $ 0.41 $ 0.41 $ 0.18 $ 1.59 $ 0.95 Diluted 0.39 0.40 0.17 1.54 0.93 Dividends Paid Per Common Share — — — — — Bridgewater Bancshares, Inc. and Subsidiaries Analysis of Average Balances, Yields and Rates (dollars in thousands, except per share data) For the Year Ended December 31, 2021 December 31, 2020 Average Interest Yield/ Average Interest Yield/ Balance & Fees Rate Balance & Fees Rate (dollars in thousands) Interest Earning Assets: Cash Investments $ 132,188 $ 199 0.15 % $ 80,113 $ 170 0.21 % Investment Securities: Taxable Investment Securities 317,954 7,015 2.21 234,873 5,712 2.43 Tax-Exempt Investment Securities (1) 75,313 3,242 4.30 87,587 3,807 4.35 Total Investment Securities 393,267 10,257 2.61 322,460 9,519 2.95 Paycheck Protection Program Loans (2) 103,151 6,441 6.24 122,240 4,143 3.39 Loans (1)(2) 2,481,706 112,587 4.54 2,032,180 101,469 4.99 Total Loans 2,584,857 119,028 4.60 2,154,420 105,612 4.90 Federal Home Loan Bank Stock 5,571 259 4.65 8,866 444 5.01 Total Interest Earning Assets 3,115,883 129,743 4.16 % 2,565,859 115,745 4.51 % Noninterest Earning Assets 73,917 51,720 Total Assets $ 3,189,800 $ 2,617,579 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 441,528 $ 2,052 0.46 % $ 295,036 $ 1,626 0.55 % Savings and Money Market Deposits 773,779 3,729 0.48 523,520 5,341 1.02 Time Deposits 323,638 4,099 1.27 374,195 7,806 2.09 Brokered Deposits 406,863 3,962 0.97 348,126 5,040 1.45 Total Interest Bearing Deposits 1,945,808 13,842 0.71 1,540,877 19,813 1.29 Federal Funds Purchased 2,479 6 0.24 7,239 111 1.53 Notes Payable 1,658 61 3.66 11,749 439 3.73 FHLB Advances 53,294 831 1.56 148,524 3,390 2.28 Subordinated Debentures 82,865 4,630 5.59 50,954 3,109 6.10 Total Interest Bearing Liabilities 2,086,104 19,370 0.93 % 1,759,343 26,862 1.53 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 764,087 579,595 Other Noninterest Bearing Liabilities 23,372 19,905 Total Noninterest Bearing Liabilities 787,459 599,500 Shareholders' Equity 316,237 258,736 Total Liabilities and Shareholders' Equity $ 3,189,800 $ 2,617,579 Net Interest Income / Interest Rate Spread 110,373 3.23 % 88,883 2.98 % Net Interest Margin (3) 3.54 % 3.46 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities (864 ) (919 ) Net Interest Income $ 109,509 $ 87,964 _________________________________ (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 Year Ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 Pre-Provision Net Revenue Noninterest Income $ 1,288 $ 1,410 $ 986 $ 5,309 $ 5,839 Less: Gain on sales of Securities — (48 ) (30 ) (750 ) (1,503 ) Total Operating Noninterest Income 1,288 1,362 956 4,559 4,336 Plus: Net Interest Income 29,153 28,673 24,841 109,509 87,964 Net Operating Revenue $ 30,441 $ 30,035 $ 25,797 $ 114,068 $ 92,300 Noninterest Expense $ 12,459 $ 13,236 $ 15,258 $ 48,095 $ 45,387 Less: Amortization of Tax Credit Investments (152 ) (152 ) (146 ) (562 ) (738 ) Less: Debt Prepayment Fees — (582 ) (5,613 ) (582 ) (7,043 ) Total Operating Noninterest Expense $ 12,307 $ 12,502 $ 9,499 $ 46,951 $ 37,606 Pre-Provision Net Revenue $ 18,134 $ 17,533 $ 16,298 $ 67,117 $ 54,694 Plus: Non-Operating Revenue Adjustments — 48 30 750 1,503 Less: Provision for Loan Losses 1,150 1,300 3,900 5,150 12,750 Non-Operating Expense Adjustments 152 734 5,759 1,144 7,781 Provision for Income Taxes 4,318 4,038 1,690 15,886 8,472 Net Income $ 12,514 $ 11,509 $ 4,979 $ 45,687 $ 27,194 Average Assets $ 3,403,270 $ 3,332,301 $ 2,816,032 $ 3,189,800 $ 2,617,579 Pre-Provision Net Revenue Return on Average Assets 2.11 % 2.09 % 2.30 % 2.10 % 2.09 % As of and for the Three Months Ended As of and for the Year Ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 Core Net Interest Margin Net Interest Income (Tax-Equivalent Basis) $ 29,388 $ 28,880 $ 25,051 $ 110,373 $ 88,883 Less: Loan Fees (1,462 ) (1,487 ) (1,514 ) (5,173 ) (5,283 ) Less: PPP Interest and Fees (1,057 ) (1,753 ) (2,097 ) (6,441 ) (4,143 ) Core Net Interest Income $ 26,869 $ 25,640 $ 21,440 $ 98,759 $ 79,457 Average Interest Earning Assets 3,320,603 3,234,301 2,759,543 3,115,883 2,565,859 Less: Average PPP Loans (39,900 ) (76,006 ) (165,099 ) (103,151 ) (122,240 ) Core Average Interest Earning Assets $ 3,280,703 $ 3,158,295 $ 2,594,444 $ 3,012,732 $ 2,443,619 Core Net Interest Margin 3.25 % 3.22 % 3.29 % 3.28 % 3.25 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended For the Year Ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 Efficiency Ratio Noninterest Expense $ 12,459 $ 13,236 $ 15,258 $ 48,095 $ 45,387 Less: Amortization of Intangible Assets (48 ) (48 ) (48 ) (191 ) (191 ) Adjusted Noninterest Expense $ 12,411 $ 13,188 $ 15,210 $ 47,904 $ 45,196 Net Interest Income $ 29,153 $ 28,673 $ 24,841 $ 109,509 $ 87,964 Noninterest Income 1,288 1,410 986 5,309 5,839 Less: Gain on Sales of Securities — (48 ) (30 ) (750 ) (1,503 ) Adjusted Operating Revenue $ 30,441 $ 30,035 $ 25,797 $ 114,068 $ 92,300 Efficiency Ratio 40.8 % 43.9 % 59.0 % 42.0 % 49.0 % Adjusted Efficiency Ratio Noninterest Expense $ 12,459 $ 13,236 $ 15,258 $ 48,095 $ 45,387 Less: Amortization of Tax Credit Investments (152 ) (152 ) (146 ) (562 ) (738 ) Less: Debt Prepayment Fees — (582 ) (5,613 ) (582 ) (7,043 ) Less: Amortization of Intangible Assets (48 ) (48 ) (48 ) (191 ) (191 ) Adjusted Noninterest Expense $ 12,259 $ 12,454 $ 9,451 $ 46,760 $ 37,415 Net Interest Income $ 29,153 $ 28,673 $ 24,841 $ 109,509 $ 87,964 Noninterest Income 1,288 1,410 986 5,309 5,839 Less: Gain on Sales of Securities — (48 ) (30 ) (750 ) (1,503 ) Adjusted Operating Revenue $ 30,441 $ 30,035 $ 25,797 $ 114,068 $ 92,300 Adjusted Efficiency Ratio 40.3 % 41.5 % 36.6 % 41.0 % 40.5 % For the Three Months Ended For the Year Ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 Adjusted Noninterest Expense to Average Assets (Annualized) Noninterest Expense $ 12,459 $ 13,236 $ 15,258 $ 48,095 $ 45,387 Less: Amortization of Tax Credit Investments (152 ) (152 ) (146 ) (562 ) (738 ) Less: Debt Prepayment Fees — (582 ) (5,613 ) (582 ) (7,043 ) Adjusted Noninterest Expense $ 12,307 $ 12,502 $ 9,499 $ 46,951 $ 37,606 Average Assets $ 3,403,270 $ 3,332,301 $ 2,816,032 $ 3,189,800 $ 2,617,579 Adjusted Noninterest Expense to Average Assets (Annualized) 1.43 % 1.49 % 1.34 % 1.47 % 1.44 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) As of and for the Three Months Ended As of and for the Year Ended December 31, September 30, December 31, December 31, December 31, 2021 2021 2020 2021 2020 Tangible Common Equity and Tangible Common Equity/Tangible Assets Total Shareholders' Equity $ 379,272 $ 367,803 $ 265,405 Less: Preferred Stock (66,514 ) (66,515 ) — Total Common Shareholders' Equity 312,758 301,288 265,405 Less: Intangible Assets (3,105 ) (3,153 ) (3,296 ) Tangible Common Equity $ 309,653 $ 298,135 $ 262,109 Total Assets $ 3,477,659 $ 3,389,125 $ 2,927,345 Less: Intangible Assets (3,105 ) (3,153 ) (3,296 ) Tangible Assets $ 3,474,554 $ 3,385,972 $ 2,924,049 Tangible Common Equity/Tangible Assets 8.91 % 8.81 % 8.96 % Tangible Book Value Per Share Book Value Per Common Share $ 11.09 $ 10.73 $ 9.43 Less: Effects of Intangible Assets (0.11 ) (0.11 ) (0.12 ) Tangible Book Value Per Common Share $ 10.98 $ 10.62 $ 9.31 Return on Average Tangible Common Equity Net Income Available to Common Shareholders $ 11,343 $ 11,509 $ 4,979 $ 44,516 $ 27,194 Average Shareholders' Equity $ 374,035 $ 330,604 $ 265,716 $ 316,237 $ 258,736 Less: Average Preferred Stock (66,515 ) (32,332 ) — (24,915 ) — Average Common Equity 307,520 298,272 265,716 291,322 258,736 Less: Effects of Average Intangible Assets (3,132 ) (3,180 ) (3,323 ) (3,204 ) (3,395 ) Average Tangible Common Equity $ 304,388 $ 295,092 $ 262,393 $ 288,118 $ 255,341 Return on Average Tangible Common Equity 14.78 % 15.47 % 7.55 % 15.45 % 10.65 % Three Months Ended December 31, September 30, June 30, March 31, December 31, 2021 2021 2021 2021 2020 Tangible Common Equity Total Shareholders' Equity $ 379,272 $ 367,803 $ 290,830 $ 279,171 $ 265,405 Less: Preferred Stock (66,514 ) (66,515 ) — — — Common Shareholders' Equity 312,758 301,288 290,830 279,171 265,405 Less: Intangible Assets (3,105 ) (3,153 ) (3,200 ) (3,248 ) (3,296 ) Tangible Common Equity $ 309,653 $ 298,135 $ 287,630 $ 275,923 $ 262,109 As of and for the Three Months Ended As of and for the Year Ended December 31, 2021 September 30, 2021 December 31, 2020 December 31, 2021 December 31, 2020 Adjusted Diluted Earnings Per Common Share Net Income Available to Common Shareholders $ 11,343 $ 11,509 $ 4,979 $ 44,516 $ 27,194 Add: Debt Prepayment Fees — 582 5,613 582 7,043 Less: Tax Impact — (151 ) (1,336 ) (151 ) (1,676 ) Net Income, Excluding Impact of Debt Prepayment Fees $ 11,343 $ 11,940 $ 9,256 $ 44,947 $ 32,561 Diluted Weighted Average Shares Outstanding 29,038,785 29,110,547 28,823,384 28,968,286 29,170,220 Adjusted Diluted Earnings Per Common Share $ 0.39 $ 0.41 $ 0.32 $ 1.55 $ 1.12 View source version on businesswire.com: https://www.businesswire.com/news/home/20220126005633/en/
Investor Relations Contact: Justin Horstman Director of Investor Relations investorrelations@bwbmn.com 952-542-5169