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 Third Quarter 2022 Net Income of $14.5 Million, $0.47 Diluted Earnings Per Common Share By: Bridgewater Bancshares, Inc. via Business Wire October 27, 2022 at 07:05 AM EDT Bridgewater Bancshares, Inc. (Nasdaq: BWB) (the Company), the parent company of Bridgewater Bank (the Bank), today announced record net income of $14.5 million for the third quarter of 2022, a 12.7% increase over net income of $12.9 million for the second quarter of 2022, and a 26.1% increase over net income of $11.5 million for the third quarter of 2021. Earnings per diluted common share for the third quarter of 2022 were $0.47, a 14.6% increase compared to $0.41 per diluted common share for the second quarter of 2022, and a 19.4% increase compared to $0.40 per diluted common share for the same period in 2021. “Bridgewater’s ability to produce consistent financial results remained evident in the third quarter with record pre-provision net revenue and continued growth of tangible book value per share,” said Chairman, Chief Executive Officer, and President, Jerry Baack. “Our impressive profitability was driven by robust loan growth, well controlled expenses and the hard work of our team members to expand and deepen our client relationships. “While the current economic environment creates an elevated level of uncertainty, we remain confident in our business model. As the rise in interest rates drives deposit costs higher and creates near-term net interest margin pressure, we believe our proven ability to grow the balance sheet can support our continued focus on overall revenue growth. Couple this with our superb credit quality and an efficiency ratio among the best in the industry and we have a story that is poised to continue driving sustained shareholder value.” Third Quarter 2022 Financial Results Diluted Adjusted Nonperforming ROA PPNR ROA (1) ROE earnings per share efficiency ratio (1) assets to total assets 1.46 % 2.15 % 14.99 % $ 0.47 39.4 % 0.02 % ________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. Third Quarter 2022 Highlights Diluted earnings per common share were $0.47, compared to $0.41 per common share for the second quarter of 2022. Tangible book value per share, a non-GAAP financial measure, increased $0.30, or 10.8% annualized, to $11.33, compared to $11.03 at June 30, 2022, despite the market value depreciation of the securities portfolio due to rapidly rising interest rates, which continues to negatively impact accumulated other comprehensive income. Record pre-provision net revenue (PPNR), a non-GAAP financial measure, of $21.4 million, compared to $20.4 million for the second quarter of 2022, an increase of $1.0 million, or 4.9%. PPNR ROA, a non-GAAP financial measure, was 2.15%, compared to 2.19% for the second quarter of 2022. Annualized return on average assets (ROA) and annualized return on average shareholders’ equity (ROE) for the third quarter of 2022 were 1.46% and 14.99%, compared to ROA and ROE of 1.38% and 13.55%, respectively, for the second quarter of 2022. Annualized return on average tangible common equity, a non-GAAP financial measure, was 17.03% for the third quarter of 2022, compared to 15.26% for the second quarter of 2022. Gross loans increased $154.2 million, or 19.0% annualized, from the end of the second quarter of 2022. Deposits increased $103.1 million, or 12.8% annualized, from the end of the second quarter of 2022. Net interest margin (on a fully tax-equivalent basis) was 3.53%, compared to 3.58% in the second quarter of 2022. 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, was 3.38%, compared to 3.34% in the second quarter of 2022. Adjusted efficiency ratio, a non-GAAP financial measure which excludes the impact of certain non-routine income and expenses from noninterest expense, was 39.4%, compared to 40.0% for the second quarter of 2022. A loan loss provision of $1.5 million was recorded to support strong organic loan growth. The allowance for loan losses to total loans was 1.38% at September 30, 2022, compared to 1.39% at June 30, 2022. Annualized net loan charge-offs (recoveries) as a percentage of average loans were (0.03)% for the third quarter of 2022, compared to 0.00% for the second quarter of 2022. Year-Over-Year Highlights Net income was $14.5 million for the third quarter of 2022, compared to $11.5 million for the third quarter of 2021, an increase of $3.0 million, or 26.1%. Diluted earnings per common share for the third quarter of 2022 were $0.47, compared to $0.40 for the third quarter of 2021, an increase of 19.4%. Net interest margin (on a fully tax-equivalent basis) was 3.53% for the third quarter of 2022 compared to 3.54% for the third quarter of 2021. Core net interest margin (on a fully tax-equivalent basis), a non-GAAP financial measure, was 3.38% for the third quarter of 2022, compared to 3.22% for the third quarter of 2021. Gross loans increased $668.1 million at September 30, 2022, or 24.6%, compared to September 30, 2021. Deposits increased $450.9 million at September 30, 2022, or 15.8%, compared to September 30, 2021. Key Financial Measures As of and for the Three Months Ended As of and for the Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2022 2022 2021 2022 2021 Per Common Share Data Basic Earnings Per Share $ 0.49 $ 0.43 $ 0.41 $ 1.32 $ 1.18 Diluted Earnings Per Share 0.47 0.41 0.40 1.27 1.14 Book Value Per Share 11.44 11.14 10.73 11.44 10.73 Tangible Book Value Per Share (1) 11.33 11.03 10.62 11.33 10.62 Basic Weighted Average Shares Outstanding 27,520,117 27,839,260 28,047,280 27,825,517 28,035,246 Diluted Weighted Average Shares Outstanding 28,592,854 28,803,842 29,110,547 28,882,701 29,077,850 Shares Outstanding at Period End 27,587,978 27,677,372 28,066,822 27,587,978 28,066,822 Selected Performance Ratios Return on Average Assets (Annualized) 1.46 % 1.38 % 1.37 % 1.42 % 1.42 % Pre-Provision Net Revenue Return on Average Assets (Annualized) (1) 2.15 2.19 2.09 2.15 2.10 Return on Average Shareholders' Equity (Annualized) 14.99 13.55 13.81 13.85 14.95 Return on Average Tangible Common Equity (Annualized) (1) 17.03 15.26 15.47 15.63 15.69 Yield on Interest Earning Assets(2) 4.37 4.16 4.14 4.23 4.20 Yield on Total Loans, Gross(2) 4.59 4.45 4.65 4.50 4.65 Cost of Total Deposits 0.73 0.46 0.48 0.55 0.53 Cost of Funds 0.93 0.63 0.65 0.73 0.70 Net Interest Margin (2) 3.53 3.58 3.54 3.57 3.55 Core Net Interest Margin (1)(2) 3.38 3.34 3.22 3.36 3.29 Efficiency Ratio (1) 39.8 40.2 43.9 40.7 42.4 Adjusted Efficiency Ratio (1) 39.4 40.0 41.5 40.4 41.3 Noninterest Expense to Average Assets (Annualized) 1.42 1.47 1.58 1.48 1.53 Adjusted Noninterest Expense to Average Assets (Annualized) (1) 1.41 1.47 1.49 1.47 1.49 Loan to Deposit Ratio 102.3 100.7 95.0 Core Deposits to Total Deposits (3) 83.0 82.9 83.3 Tangible Common Equity to Tangible Assets (1) 7.57 7.87 8.81 Capital Ratios (Bank Only) (4) Tier 1 Leverage Ratio 11.24 % 11.43 % 10.96 % Common Equity Tier 1 Risk-based Capital Ratio 11.46 11.53 11.88 Tier 1 Risk-based Capital Ratio 11.46 11.53 11.88 Total Risk-based Capital Ratio 12.67 12.74 13.13 Capital Ratios (Consolidated) (4) Tier 1 Leverage Ratio 9.98 % 10.33 % 10.70 % Common Equity Tier 1 Risk-based Capital Ratio 8.47 8.50 9.47 Tier 1 Risk-based Capital Ratio 10.19 10.29 11.65 Total Risk-based Capital Ratio 13.78 13.98 15.93 ________________________________ (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 September 30, June 30, March 31, December 31, September 30, (dollars in thousands) 2022 2022 2022 2021 2021 Selected Balance Sheet Data Total Assets $ 4,128,987 $ 3,883,264 $ 3,607,920 $ 3,477,659 $ 3,389,125 Total Loans, Gross 3,380,082 3,225,885 2,987,967 2,819,472 2,712,012 Allowance for Loan Losses 46,491 44,711 41,692 40,020 38,901 Goodwill and Other Intangibles 2,962 3,009 3,057 3,105 3,153 Deposits 3,305,074 3,201,953 3,035,611 2,946,237 2,854,157 Tangible Common Equity (1) 312,531 305,360 309,870 309,653 298,135 Total Shareholders' Equity 382,007 374,883 379,441 379,272 367,803 Average Total Assets - Quarter-to-Date 3,948,201 3,743,575 3,513,798 3,403,270 3,332,301 Average Shareholders' Equity - Quarter-to-Date 384,020 381,448 383,024 374,035 330,604 ________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. For the Three Months Ended For the Nine Months Ended September 30, June 30, September 30, September 30, September 30, (dollars in thousands) 2022 2022 2021 2022 2021 Selected Income Statement Data Interest Income $ 42,359 $ 37,782 $ 33,517 $ 114,835 $ 95,104 Interest Expense 8,264 5,252 4,844 18,030 14,748 Net Interest Income 34,095 32,530 28,673 96,805 80,356 Provision for Loan Losses 1,500 3,025 1,300 6,200 4,000 Net Interest Income after Provision for Loan Losses 32,595 29,505 27,373 90,605 76,356 Noninterest Income 1,387 1,650 1,410 4,594 4,021 Noninterest Expense 14,157 13,752 13,236 41,417 35,636 Income Before Income Taxes 19,825 17,403 15,547 53,782 44,741 Provision for Income Taxes 5,312 4,521 4,038 14,125 11,568 Net Income 14,513 12,882 11,509 39,657 33,173 Preferred Stock Dividends (1,013) (1,014) — (3,040) — Net Income Available to Common Shareholders $ 13,500 $ 11,868 $ 11,509 $ 36,617 $ 33,173 Income Statement Net Interest Income Net interest income was $34.1 million for the third quarter of 2022, an increase of $1.6 million, or 4.8%, from $32.5 million in the second quarter of 2022, and an increase of $5.4 million, or 18.9%, from $28.7 million in the third quarter of 2021. The linked-quarter increase in net interest income was primarily due to growth in average interest earning assets and higher yields on investment securities and loans, offset partially by higher rates paid on deposits. The year-over-year increase in net interest income was primarily due to growth in average interest earning assets and higher yields on investment securities and core loans, offset partially by higher rates paid on deposits and lower PPP fee recognition. Average interest earning assets were $3.87 billion for the third quarter of 2022, an increase of $200.1 million, or 5.5%, from $3.67 billion for the second quarter of 2022, and an increase of $637.6 million, or 19.7%, from $3.23 billion for the third quarter of 2021. The linked-quarter and year-over-year increases in average interest earning assets were primarily due to strong organic growth in the loan portfolio and continued purchases of investment securities, offset partially by the forgiveness of PPP loans and the reduction of cash balances. Net interest margin (on a fully tax-equivalent basis) for the third quarter of 2022 was 3.53%, a five basis point decrease from 3.58% in the second quarter of 2022, and a modest one basis point decline from 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, for the third quarter of 2022 was 3.38%, a four basis point increase from 3.34% in the second quarter of 2022, and a 16 basis point increase from 3.22% in the third quarter of 2021. The Company remains focused on managing the impact of continued interest rate hikes and the evolving shape of the yield curve during this unique interest rate environment. As the PPP loan portfolio has almost fully paid off, the recognition of fees associated with the originations has decreased significantly, which impacts comparability between periods. The Company recognized $90,000 of PPP origination fees during the third quarter of 2022, compared to $244,000 during the second quarter of 2022, and $1.6 million during the third quarter of 2021. Remaining PPP origination fees to be recognized as of September 30, 2022 were $45,000. Interest income was $42.4 million for the third quarter of 2022, an increase of $4.6 million, or 12.1%, from $37.8 million in the second quarter of 2022, and an increase of $8.8 million, or 26.4%, from $33.5 million in the third quarter of 2021. The yield on interest earning assets (on a fully tax-equivalent basis) was 4.37% in the third quarter of 2022, compared to 4.16% in the second quarter of 2022, and 4.14% in the third quarter of 2021. The linked-quarter expansion in the yield on interest earning assets was primarily due to the rapid increase in market interest rates resulting in new loan originations and investment purchases at yields accretive to the existing portfolios. The year-over-year increase in the yield on interest earning assets was primarily due to growth and repricing of the loan and securities portfolios in the rising interest rate environment, offset partially by the lower recognition of PPP origination fees. Loan interest income and loan fees remain the primary contributing factors to the changes in the yield on interest earning assets. The aggregate loan yield, excluding PPP loans, increased to 4.59% in the third quarter of 2022, which was 16 basis points higher than 4.43% in the second quarter of 2022, and eight basis points higher than 4.51% in the third quarter of 2021. While loan fees have maintained a relatively stable contribution to the aggregate loan yield, the current period was impacted by fewer loan prepayments, which historically has accelerated the recognition of loan fees. Despite the decrease in fee recognition, the Company is encouraged that the core loan yield continues to rise as new loan originations and the existing portfolio reprice in the higher rate environment. A summary of interest and fees recognized on loans, excluding PPP loans, for the periods indicated is as follows: Three Months Ended September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 Interest 4.42 % 4.17 % 4.15 % 4.20 % 4.28 % Fees 0.17 0.26 0.25 0.21 0.23 Yield on Loans, Excluding PPP Loans 4.59 % 4.43 % 4.40 % 4.41 % 4.51 % Interest expense was $8.3 million for the third quarter of 2022, an increase of $3.0 million, or 57.3%, from $5.3 million in the second quarter of 2022, and an increase of $3.4 million, or 70.6%, from $4.8 million in the third quarter of 2021. The cost of interest bearing liabilities increased 44 basis points on a linked-quarter basis from 0.86% in the second quarter of 2022 to 1.30% in the third quarter of 2022, primarily due to the rapid increase in market interest rates that occurred during the quarter. On a year-over-year basis, the cost of interest bearing liabilities increased 42 basis points from 0.88% in the third quarter of 2021 to 1.30% in the third quarter of 2022, primarily due to higher rates paid on deposits and the increased utilization of federal funds purchased and FHLB advances in the rising interest rate environment. Interest expense on deposits was $6.0 million for the third quarter of 2022, an increase of $2.5 million, or 73.1%, from $3.5 million in the second quarter of 2022, and an increase of $2.6 million, or 75.1%, from $3.4 million in the third quarter of 2021. The cost of total deposits increased 27 basis points on a linked-quarter basis from 0.46% in the second quarter of 2022, to 0.73% in the third quarter of 2022, primarily due to the rapid increase in rates in 2022. On a year-over-year basis, the cost of total deposits increased 25 basis points from 0.48% in the third quarter of 2021, to 0.73% in the third quarter of 2022, primarily due to the upward repricing of the deposit portfolio in the higher interest rate environment. A summary of the Company’s average balances, interest yields and rates, and net interest margin for the three months ended September 30, 2022, June 30, 2022, and September 30, 2021 is as follows: For the Three Months Ended September 30, 2022 June 30, 2022 September 30, 2021 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 $ 57,613 $ 165 1.13 % $ 61,046 $ 40 0.26 % $ 187,405 $ 67 0.14 % Investment Securities: Taxable Investment Securities 461,255 3,741 3.22 417,142 2,696 2.59 314,367 1,751 2.21 Tax-Exempt Investment Securities (1) 75,801 799 4.18 74,261 795 4.30 71,801 737 4.07 Total Investment Securities 537,056 4,540 3.35 491,403 3,491 2.85 386,168 2,488 2.56 Paycheck Protection Program Loans (2) 2,424 96 15.75 8,335 263 12.67 76,006 1,753 9.15 Loans (1)(2) 3,263,390 37,724 4.59 3,099,344 34,205 4.43 2,579,021 29,348 4.51 Total Loans 3,265,814 37,820 4.59 3,107,679 34,468 4.45 2,655,027 31,101 4.65 Federal Home Loan Bank Stock 11,413 156 5.42 11,620 59 2.04 5,701 68 4.65 Total Interest Earning Assets 3,871,896 42,681 4.37 % 3,671,748 38,058 4.16 % 3,234,301 33,724 4.14 % Noninterest Earning Assets 76,305 71,827 98,000 Total Assets $ 3,948,201 $ 3,743,575 $ 3,332,301 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 517,658 $ 1,032 0.79 % $ 552,502 $ 694 0.50 % $ 479,580 $ 562 0.47 % Savings and Money Market Deposits 999,932 2,494 0.99 925,354 1,185 0.51 801,354 904 0.45 Time Deposits 288,621 847 1.16 280,645 665 0.95 318,222 928 1.16 Brokered Deposits 447,034 1,612 1.43 403,931 912 0.91 440,167 1,023 0.92 Total Interest Bearing Deposits 2,253,245 5,985 1.05 2,162,432 3,456 0.64 2,039,323 3,417 0.66 Federal Funds Purchased 106,826 709 2.63 137,379 410 1.20 — — — FHLB Advances 72,343 328 1.80 47,511 167 1.41 54,130 213 1.56 Subordinated Debentures 92,503 1,242 5.33 92,396 1,219 5.29 91,337 1,214 5.27 Total Interest Bearing Liabilities 2,524,917 8,264 1.30 % 2,439,718 5,252 0.86 % 2,184,790 4,844 0.88 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 991,545 882,477 784,148 Other Noninterest Bearing Liabilities 47,719 39,932 32,759 Total Noninterest Bearing Liabilities 1,039,264 922,409 816,907 Shareholders' Equity 384,020 381,448 330,604 Total Liabilities and Shareholders' Equity $ 3,948,201 $ 3,743,575 $ 3,332,301 Net Interest Income / Interest Rate Spread 34,417 3.07 % 32,806 3.30 % 28,880 3.26 % Net Interest Margin (3) 3.53 % 3.58 % 3.54 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities and Loans (322) (276) (207) Net Interest Income $ 34,095 $ 32,530 $ 28,673 ________________________________ (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 $1.5 million for the third quarter of 2022, a decrease of $1.5 million from $3.0 million for the second quarter of 2022, and an increase of $200,000 from $1.3 million for the third quarter of 2021. The provision recorded in the third quarter of 2022 was primarily attributable to the strong growth of the loan portfolio. The allowance for loan losses to total loans was 1.38% at September 30, 2022, compared to 1.39% at June 30, 2022, and 1.43% at September 30, 2021. 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 Nine Months Ended September 30, June 30, September 30, September 30, September 30, (dollars in thousands) 2022 2022 2021 2022 2021 Balance at Beginning of Period $ 44,711 $ 41,692 $ 37,591 $ 40,020 $ 34,841 Provision for Loan Losses 1,500 3,025 1,300 6,200 4,000 Charge-offs (5) (14) (20) (34) (37) Recoveries 285 8 30 305 97 Balance at End of Period $ 46,491 $ 44,711 $ 38,901 $ 46,491 $ 38,901 Noninterest Income Noninterest income was $1.4 million for the third quarter of 2022, a decrease of $263,000 from $1.7 million for the second quarter of 2022, and a decrease of $23,000 from $1.4 million for the third quarter of 2021. The linked-quarter decrease was primarily due to a decrease in letter of credit fees and other income, offset partially by an increase in bank-owned life insurance income. The year-over-year decrease was primarily due to decreased letter of credit fees and gains on sales of securities, offset partially by an increase in bank-owned life insurance income. The following table presents the major components of noninterest income for the periods indicated: Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, September 30, (dollars in thousands) 2022 2022 2021 2022 2021 Noninterest Income: Customer Service Fees $ 313 $ 298 $ 268 $ 892 $ 733 Net Gain on Sales of Securities — 52 48 52 750 Letter of Credit Fees 428 564 577 1,234 1,135 Debit Card Interchange Fees 153 152 143 438 414 Swap Fees — — — 557 — Bank-Owned Life Insurance 227 149 166 524 166 Other Income 266 435 208 897 823 Totals $ 1,387 $ 1,650 $ 1,410 $ 4,594 $ 4,021 Noninterest Expense Noninterest expense was $14.2 million for the third quarter of 2022, an increase of $405,000 from $13.8 million for the second quarter of 2022, and an increase of $921,000 from $13.2 million for the third quarter of 2021. The linked-quarter increase was primarily due to an increase in salaries and employee benefits and technology expenses, offset partially by a decrease in professional and consulting fees, marketing and advertising expenses, and other expenses. The year-over-year increase was primarily attributable to increases in salaries and employee benefits, occupancy and equipment, and other expenses, offset partially by a decrease in debt prepayment fees. The following table presents the major components of noninterest expense for the periods indicated: Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, September 30, (dollars in thousands) 2022 2022 2021 2022 2021 Noninterest Expense: Salaries and Employee Benefits $ 9,449 $ 8,977 $ 8,309 $ 27,120 $ 22,923 Occupancy and Equipment 1,086 1,042 942 3,213 2,977 FDIC Insurance Assessment 315 330 355 1,005 960 Data Processing 372 356 325 1,025 916 Professional and Consulting Fees 716 769 708 2,181 1,804 Information Technology and Telecommunications 650 594 598 1,822 1,609 Marketing and Advertising 479 524 418 1,629 1,018 Intangible Asset Amortization 48 47 48 143 143 Amortization of Tax Credit Investments 114 63 152 294 410 Debt Prepayment Fees — — 582 — 582 Other Expense 928 1,050 799 2,985 2,294 Totals $ 14,157 $ 13,752 $ 13,236 $ 41,417 $ 35,636 The Company continues to add key talent across the organization, reaching 246 full-time equivalent employees at September 30, 2022, compared to 236 employees at June 30, 2022, and 219 employees at September 30, 2021. The efficiency ratio, a non-GAAP financial measure, was 39.8% for the third quarter of 2022, compared to 40.2% for the second quarter of 2022, and 43.9% for the third quarter of 2021. Excluding the impact of certain non-routine income and expenses, the adjusted efficiency ratio, a non-GAAP financial measure, was 39.4% for the third quarter of 2022, 40.0% for the second quarter of 2022 and 41.5% for the third quarter of 2021. Income Taxes The effective combined federal and state income tax rate for the third quarter of 2022 was 26.8%, a slight increase from 26.0% for the second quarter of 2022 and 26.0% for the third quarter of 2021. Balance Sheet Total assets at September 30, 2022 were $4.13 billion, a 6.3% increase from $3.88 billion at June 30, 2022, and a 21.8% increase from $3.39 billion at September 30, 2021. The linked-quarter increase in total assets was primarily due to strong organic loan growth and continued purchases of investment securities. The year-over-year increase in total assets was primarily due to robust organic loan growth and purchases of investment securities, offset partially by a decrease in cash and cash equivalents. Total gross loans at September 30, 2022 were $3.38 billion, an increase of $154.2 million, or 4.8%, over total gross loans of $3.23 billion at June 30, 2022, and an increase of $668.1 million, or 24.6%, over total gross loans of $2.71 billion at September 30, 2021. The increase in the loan portfolio during the third quarter of 2022 was primarily due to growth in the commercial and multifamily segments, offset partially by a decrease in the construction and land development segment which was the result of completed construction projects migrating to permanent financing. While the Company’s loan growth in the third quarter of 2022 remained strong, the pace began to moderate slightly, compared to the first half of 2022 due to active balance sheet management to align loan growth with the funding outlook, sales of participations on larger originations to manage growth, and the impact of the higher interest rate environment on the number of deals that made financial sense. The following table presents the dollar composition of the Company’s loan portfolio, by category, at the dates indicated: September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 (dollars in thousands) Commercial $ 412,448 $ 403,569 $ 363,290 $ 360,169 $ 350,081 Paycheck Protection Program 1,192 4,860 12,309 26,162 54,190 Construction and Land Development 335,557 359,191 321,131 281,474 257,167 Real Estate Mortgage: 1 - 4 Family Mortgage 341,102 334,815 312,201 305,317 290,535 Multifamily 1,230,509 1,087,865 1,012,623 910,243 865,172 CRE Owner Occupied 151,088 142,214 117,969 111,096 101,834 CRE Nonowner Occupied 900,691 886,432 840,463 818,569 786,271 Total Real Estate Mortgage Loans 2,623,390 2,451,326 2,283,256 2,145,225 2,043,812 Consumer and Other 7,495 6,939 7,981 6,442 6,762 Total Loans, Gross 3,380,082 3,225,885 2,987,967 2,819,472 2,712,012 Allowance for Loan Losses (46,491) (44,711) (41,692) (40,020) (38,901) Net Deferred Loan Fees (9,088) (9,536) (9,065) (9,535) (10,199) Total Loans, Net $ 3,324,503 $ 3,171,638 $ 2,937,210 $ 2,769,917 $ 2,662,912 Total deposits at September 30, 2022 were $3.31 billion, an increase of $103.1 million, or 3.2%, over total deposits of $3.20 billion at June 30, 2022, and an increase of $450.9 million, or 15.8%, over total deposits of $2.85 billion at September 30, 2021. Deposit growth in the third quarter of 2022 was primarily due to an increase in savings and money market deposits and time deposits, offset partially by a decline in interest bearing transaction deposits and brokered deposits. In addition to the continued growth of core deposits, brokered deposits are also being used as a supplemental funding source, as needed, for the robust loan portfolio growth. Given the rapid rise in interest rates in 2022 and the prospect for more, 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: September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 (dollars in thousands) Noninterest Bearing Transaction Deposits $ 961,084 $ 961,998 $ 835,482 $ 875,084 $ 846,490 Interest Bearing Transaction Deposits 510,396 522,151 598,402 544,789 488,785 Savings and Money Market Deposits 1,077,333 952,138 890,926 863,567 791,861 Time Deposits 293,052 272,424 286,674 293,474 309,824 Brokered Deposits 463,209 493,242 424,127 369,323 417,197 Total Deposits $ 3,305,074 $ 3,201,953 $ 3,035,611 $ 2,946,237 $ 2,854,157 Capital Total shareholders’ equity at September 30, 2022 was $382.0 million, an increase of $7.1 million compared to total shareholders’ equity of $374.9 million at June 30, 2022, and an increase of $14.2 million, or 3.9%, over total shareholders’ equity of $367.8 million at September 30, 2021. The linked-quarter increase was due to net income retained and unrealized gains in the derivatives portfolio, offset partially by unrealized losses in the securities portfolio. The year-over-year increase was due to net income retained and unrealized gains in the derivatives portfolio, offset partially by an increase in stock repurchases made under the Company’s stock repurchase program and an increase in unrealized losses in the securities portfolio. During the third quarter of 2022, the Company repurchased 99,310 shares of its common stock. Shares were repurchased at a weighted average price of $16.27 per share, for a total of $1.6 million. On August 18, 2022, the Company announced that its board of directors approved a new stock repurchase program which authorizes the Company to repurchase up to $25.0 million of its common stock, subject to certain limitations and conditions. The new stock repurchase program replaced and superseded the $40.0 million stock repurchase program, under which approximately $1.6 million remained. As of September 30, 2022, no shares have been repurchased under the new plan. The Company remains committed to maintaining strong capital levels while enhancing shareholder value as it strategically executes its stock repurchase program based on various factors including valuation, capital levels and other uses of capital. Tangible book value per share, a non-GAAP financial measure, was $11.33 as of September 30, 2022, an increase of 2.7% from $11.03 as of June 30, 2022, and an increase of 6.6% from $10.62 as of September 30, 2021. The linked-quarter and year-over-year increase occurred despite the market value depreciation of the securities portfolio driven by the rapidly rising interest rate environment, which continues to negatively impact accumulated other comprehensive income. Tangible common equity as a percentage of tangible assets, a non-GAAP financial measure, was 7.57% at September 30, 2022, compared to 7.87% at June 30, 2022, and 8.81% at September 30, 2021. Today the Company 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 December 1, 2022 to shareholders of record of the Series A Preferred Stock at the close of business on November 15, 2022. Asset Quality Annualized net charge-offs (recoveries) as a percent of average loans were (0.03)% for the third quarter of 2022, compared to 0.00% for each of the previous four quarters. At September 30, 2022, the Company’s nonperforming assets, which include nonaccrual loans, loans past due 90 days and still accruing, and foreclosed assets, were $663,000, or 0.02% of total assets, as compared to $688,000, or 0.02% of total assets at June 30, 2022, and $734,000, or 0.02% of total assets at September 30, 2021. Loans that have potential weaknesses that warrant a watchlist risk rating at September 30, 2022 totaled $22.8 million, compared to $34.7 million at June 30, 2022, and $67.4 million at September 30, 2021. The linked-quarter decrease was primarily due to the migration of one relationship to substandard and the payoff of one other relationship. Loans that warranted a substandard risk rating at September 30, 2022 totaled $30.8 million, compared to $27.0 million at June 30, 2022, and $7.7 million at September 30, 2021. The following table presents a summary of asset quality measurements at the dates indicated: As of and for the Three Months Ended September 30, June 30, March 31, December 31, September 30, (dollars in thousands) 2022 2022 2022 2021 2021 Selected Asset Quality Data Loans 30-89 Days Past Due $ 38 $ 225 $ 13 $ 49 $ 18 Loans 30-89 Days Past Due to Total Loans 0.00 % 0.01 % 0.00 % 0.00 % 0.00 % Nonperforming Loans $ 663 $ 688 $ 706 $ 722 $ 734 Nonperforming Loans to Total Loans 0.02 % 0.02 % 0.02 % 0.03 % 0.03 % Foreclosed Assets $ — $ — $ — $ — $ — Nonaccrual Loans to Total Loans 0.02 % 0.02 % 0.02 % 0.03 % 0.03 % Nonaccrual Loans and Loans Past Due 90 Days and Still Accruing to Total Loans 0.02 0.02 0.02 0.03 0.03 Nonperforming Assets (1) $ 663 $ 688 $ 706 $ 722 $ 734 Nonperforming Assets to Total Assets (1) 0.02 % 0.02 % 0.02 % 0.02 % 0.02 % Allowance for Loan Losses to Total Loans 1.38 1.39 1.40 1.42 1.43 Allowance for Loan Losses to Total Loans, Excluding PPP Loans 1.38 1.39 1.40 1.43 1.46 Allowance for Loans Losses to Nonaccrual Loans 7,012.22 6,498.69 5,905.38 5,542.94 5,299.86 Net Loan Charge-Offs (Recoveries) (Annualized) to Average Loans (0.03) 0.00 0.00 0.00 0.00 ________________________________ (1) Nonperforming assets are defined as nonaccrual loans plus loans 90 days past due and still accruing plus foreclosed assets. During the COVID-19 pandemic, the Company developed programs for clients who experienced business and personal disruptions 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 one modified loan totaling $10.6 million outstanding as of September 30, 2022, representing 0.3% of the total loan portfolio, excluding PPP loans, which is down from $29.8 million at June 30, 2022. 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 successful 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 $4.1 billion and seven branches as of September 30, 2022, 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: interest rate risk, including the effects of recent and anticipated rate increases by the Federal Reserve; fluctuations in the values of the securities held in our securities portfolio, including as the result of rising interest rates; business and economic conditions generally and in the financial services industry, nationally and within our market area, including rising rates of inflation; 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; 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; 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 including the Russian invasion of Ukraine; 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 the new 1% excise tax on stock buybacks by publicly traded companies; 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) September 30, December 31, September 30, 2022 2021 2021 (Unaudited) (Unaudited) ASSETS Cash and Cash Equivalents $ 75,496 $ 143,473 $ 189,502 Bank-Owned Certificates of Deposit 1,182 1,876 1,877 Securities Available for Sale, at Fair Value 542,007 439,362 413,149 Loans, Net of Allowance for Loan Losses of $46,491 at September 30, 2022 (unaudited), $40,020 at December 31, 2021 and $38,901 at September 30, 2021 (unaudited) 3,324,503 2,769,917 2,662,912 Federal Home Loan Bank (FHLB) Stock, at Cost 15,603 5,242 5,442 Premises and Equipment, Net 48,941 49,395 49,803 Accrued Interest 11,198 9,186 8,550 Goodwill 2,626 2,626 2,626 Other Intangible Assets, Net 336 479 527 Other Assets 107,095 56,103 54,737 Total Assets $ 4,128,987 $ 3,477,659 $ 3,389,125 LIABILITIES AND EQUITY LIABILITIES Deposits: Noninterest Bearing $ 961,084 $ 875,084 $ 846,490 Interest Bearing 2,343,990 2,071,153 2,007,667 Total Deposits 3,305,074 2,946,237 2,854,157 Federal Funds Purchased 212,000 — — FHLB Advances 71,500 42,500 47,500 Subordinated Debentures, Net of Issuance Costs 92,559 92,239 92,153 Accrued Interest Payable 2,214 1,409 1,656 Other Liabilities 63,633 16,002 25,856 Total Liabilities 3,746,980 3,098,387 3,021,322 SHAREHOLDERS' EQUITY Preferred Stock- $0.01 par value; Authorized 10,000,000 Preferred Stock - Issued and Outstanding 27,600 Series A shares ($2,500 liquidation preference) at September 30, 2022 (unaudited), December 31, 2021, and September 30, 2021 (unaudited) 66,514 66,514 66,515 Common Stock- $0.01 par value; Authorized 75,000,000 Common Stock - Issued and Outstanding 27,587,978 at September 30, 2022 (unaudited), 28,206,566 at December 31, 2021 and 28,066,822 at September 30, 2021 (unaudited) 276 282 281 Additional Paid-In Capital 95,973 104,123 103,471 Retained Earnings 235,964 199,347 188,004 Accumulated Other Comprehensive Income (Loss) (16,720) 9,006 9,532 Total Shareholders' Equity 382,007 379,272 367,803 Total Liabilities and Equity $ 4,128,987 $ 3,477,659 $ 3,389,125 Bridgewater Bancshares, Inc. and Subsidiaries Consolidated Statements of Income (dollars in thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended September 30, June 30 September 30, September 30, September 30, 2022 2022 2021 2022 2021 INTEREST INCOME Loans, Including Fees $ 37,666 $ 34,358 $ 31,049 $ 103,768 $ 87,705 Investment Securities 4,372 3,325 2,333 10,567 7,065 Other 321 99 135 500 334 Total Interest Income 42,359 37,782 33,517 114,835 95,104 INTEREST EXPENSE Deposits 5,984 3,456 3,417 12,598 10,601 Notes Payable — — — — 61 FHLB Advances 329 167 213 646 669 Subordinated Debentures 1,242 1,219 1,214 3,658 3,411 Federal Funds Purchased 709 410 — 1,128 6 Total Interest Expense 8,264 5,252 4,844 18,030 14,748 NET INTEREST INCOME 34,095 32,530 28,673 96,805 80,356 Provision for Loan Losses 1,500 3,025 1,300 6,200 4,000 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 32,595 29,505 27,373 90,605 76,356 NONINTEREST INCOME Customer Service Fees 313 298 268 892 733 Net Gain on Sales of Available for Sale Securities — 52 48 52 750 Other Income 1,074 1,300 1,094 3,650 2,538 Total Noninterest Income 1,387 1,650 1,410 4,594 4,021 NONINTEREST EXPENSE Salaries and Employee Benefits 9,449 8,977 8,309 27,120 22,923 Occupancy and Equipment 1,086 1,042 942 3,213 2,977 Other Expense 3,622 3,733 3,985 11,084 9,736 Total Noninterest Expense 14,157 13,752 13,236 41,417 35,636 INCOME BEFORE INCOME TAXES 19,825 17,403 15,547 53,782 44,741 Provision for Income Taxes 5,312 4,521 4,038 14,125 11,568 NET INCOME 14,513 12,882 11,509 39,657 33,173 Preferred Stock Dividends (1,013) (1,014) — (3,040) — NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 13,500 $ 11,868 $ 11,509 $ 36,617 $ 33,173 EARNINGS PER SHARE Basic $ 0.49 $ 0.43 $ 0.41 $ 1.32 $ 1.18 Diluted 0.47 0.41 0.40 1.27 1.14 Bridgewater Bancshares, Inc. and Subsidiaries Analysis of Average Balances, Yields and Rates (dollars in thousands, except per share data) (Unaudited) For the Nine Months Ended September 30, 2022 September 30, 2021 Average Interest Yield/ Average Interest Yield/ Balance & Fees Rate Balance & Fees Rate (dollars in thousands) Interest Earning Assets: Cash Investments $ 66,301 $ 231 0.47 % $ 127,283 $ 134 0.14 % Investment Securities: Taxable Investment Securities 417,462 8,692 2.78 310,078 5,122 2.21 Tax-Exempt Investment Securities (1) 73,900 2,373 4.29 76,564 2,460 4.30 Total Investment Securities 491,362 11,065 3.01 386,642 7,582 2.62 Paycheck Protection Program Loans (2) 9,575 922 12.88 124,466 5,384 5.78 Loans (1)(2) 3,082,924 103,204 4.48 2,402,844 82,433 4.59 Total Loans 3,092,499 104,126 4.50 2,527,310 87,817 4.65 Federal Home Loan Bank Stock 9,593 269 3.75 5,658 200 4.71 Total Interest Earning Assets 3,659,755 115,691 4.23 % 3,046,893 95,733 4.20 % Noninterest Earning Assets 77,028 70,968 Total Assets $ 3,736,783 $ 3,117,861 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 545,301 $ 2,322 0.57 % $ 422,000 $ 1,504 0.48 % Savings and Money Market Deposits 934,408 4,597 0.66 763,646 2,853 0.50 Time Deposits 286,059 2,257 1.05 331,664 3,269 1.32 Brokered Deposits 419,352 3,422 1.09 407,680 2,975 0.98 Total Interest Bearing Deposits 2,185,120 12,598 0.77 1,924,990 10,601 0.74 Federal Funds Purchased 85,287 1,128 1.77 3,311 6 0.24 Notes Payable — — — 2,216 61 3.66 FHLB Advances 54,227 646 1.59 56,364 669 1.59 Subordinated Debentures 92,396 3,658 5.29 79,723 3,411 5.72 Total Interest Bearing Liabilities 2,417,030 18,030 1.00 % 2,066,604 14,748 0.95 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 899,456 731,269 Other Noninterest Bearing Liabilities 37,463 23,228 Total Noninterest Bearing Liabilities 936,919 754,497 Shareholders' Equity 382,834 296,760 Total Liabilities and Shareholders' Equity $ 3,736,783 $ 3,117,861 Net Interest Income / Interest Rate Spread 97,661 3.23 % 80,985 3.25 % Net Interest Margin (3) 3.57 % 3.55 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities and Loans (856) (629) Net Interest Income $ 96,805 $ 80,356 ________________________________ (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. Bridgewater Bancshares, Inc. and Subsidiaries Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended For the Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2022 2022 2021 2022 2021 Pre-Provision Net Revenue Noninterest Income $ 1,387 $ 1,650 $ 1,410 $ 4,594 $ 4,021 Less: Gain on Sales of Securities — (52) (48) (52) (750) Total Operating Noninterest Income 1,387 1,598 1,362 4,542 3,271 Plus: Net Interest Income 34,095 32,530 28,673 96,805 80,356 Net Operating Revenue $ 35,482 $ 34,128 $ 30,035 $ 101,347 $ 83,627 Noninterest Expense $ 14,157 $ 13,752 $ 13,236 $ 41,417 $ 35,636 Less: Amortization of Tax Credit Investments (114) (63) (152) (294) (410) Total Operating Noninterest Expense $ 14,043 $ 13,689 $ 12,502 $ 41,123 $ 34,644 Pre-Provision Net Revenue $ 21,439 $ 20,439 $ 17,533 $ 60,224 $ 48,983 Plus: Non-Operating Revenue Adjustments — 52 48 52 750 Less: Provision for Loan Losses 1,500 3,025 1,300 6,200 4,000 Non-Operating Expense Adjustments 114 63 734 294 992 Provision for Income Taxes 5,312 4,521 4,038 14,125 11,568 Net Income $ 14,513 $ 12,882 $ 11,509 $ 39,657 $ 33,173 Average Assets $ 3,948,201 $ 3,743,575 $ 3,332,301 $ 3,736,783 $ 3,117,861 Pre-Provision Net Revenue Return on Average Assets 2.15 % 2.19 % 2.09 % 2.15 % 2.10 % As of and for the Three Months Ended As of and for the Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2022 2022 2021 2022 2021 Core Net Interest Margin Net Interest Income (Tax-Equivalent Basis) $ 34,417 $ 32,806 $ 28,880 $ 97,662 $ 80,985 Less: Loan Fees (1,400) (2,030) (1,487) (5,173) (3,712) Less: PPP Interest and Fees (96) (263) (1,753) (922) (5,384) Core Net Interest Income $ 32,921 $ 30,513 $ 25,640 $ 91,567 $ 71,889 Average Interest Earning Assets $ 3,871,896 $ 3,671,748 $ 3,234,301 $ 3,659,755 $ 3,046,893 Less: Average PPP Loans (2,424) (8,335) (76,006) (9,575) (124,466) Core Average Interest Earning Assets $ 3,869,472 $ 3,663,413 $ 3,158,295 $ 3,650,180 $ 2,922,427 Core Net Interest Margin 3.38 % 3.34 % 3.22 % 3.35 % 3.29 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended For the Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2022 2022 2021 2022 2021 Efficiency Ratio Noninterest Expense $ 14,157 $ 13,752 $ 13,236 $ 41,417 $ 35,636 Less: Amortization of Intangible Assets (48) (47) (48) (143) (143) Adjusted Noninterest Expense $ 14,109 $ 13,705 $ 13,188 $ 41,274 $ 35,493 Net Interest Income 34,095 32,530 28,673 96,805 80,356 Noninterest Income 1,387 1,650 1,410 4,594 4,021 Less: Gain on Sales of Securities — (52) (48) (52) (750) Adjusted Operating Revenue $ 35,482 $ 34,128 $ 30,035 $ 101,347 $ 83,627 Efficiency Ratio 39.8 % 40.2 % 43.9 % 40.7 % 42.4 % Adjusted Efficiency Ratio Noninterest Expense $ 14,157 $ 13,752 $ 13,236 $ 41,417 $ 35,636 Less: Amortization of Tax Credit Investments (114) (63) (152) (294) (410) Less: Debt Prepayment Fees — — (582) — (582) Less: Amortization of Intangible Assets (48) (47) (48) (143) (143) Adjusted Noninterest Expense $ 13,995 $ 13,642 $ 12,454 $ 40,980 $ 34,501 Net Interest Income 34,095 32,530 28,673 96,805 80,356 Noninterest Income 1,387 1,650 1,410 4,594 4,021 Less: Gain on Sales of Securities — (52) (48) (52) (750) Adjusted Operating Revenue $ 35,482 $ 34,128 $ 30,035 $ 101,347 $ 83,627 Adjusted Efficiency Ratio 39.4 % 40.0 % 41.5 % 40.4 % 41.3 % For the Three Months Ended For the Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2022 2022 2021 2022 2021 Adjusted Noninterest Expense to Average Assets (Annualized) Noninterest Expense $ 14,157 $ 13,752 $ 13,236 $ 41,417 $ 35,636 Less: Amortization of Tax Credit Investments (114) (63) (152) (294) (410) Less: Debt Prepayment Fees — — (582) — (582) Adjusted Noninterest Expense $ 14,043 $ 13,689 $ 12,502 $ 41,123 $ 34,644 Average Assets $ 3,948,201 $ 3,743,575 $ 3,332,301 $ 3,736,783 $ 3,117,861 Adjusted Noninterest Expense to Average Assets (Annualized) 1.41 % 1.47 % 1.49 % 1.47 % 1.49 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) As of and for the Three Months Ended As of and for the Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2022 2022 2021 2022 2021 Tangible Common Equity and Tangible Common Equity/Tangible Assets Total Shareholders' Equity $ 382,007 $ 374,883 $ 367,803 Less: Preferred Stock (66,514) (66,514) (66,515) Total Common Shareholders' Equity 315,493 308,369 301,288 Less: Intangible Assets (2,962) (3,009) (3,153) Tangible Common Equity $ 312,531 $ 305,360 $ 298,135 Total Assets $ 4,128,987 $ 3,883,264 $ 3,389,125 Less: Intangible Assets (2,962) (3,009) (3,153) Tangible Assets $ 4,126,025 $ 3,880,255 $ 3,385,972 Tangible Common Equity/Tangible Assets 7.57 % 7.87 % 8.81 % Tangible Book Value Per Share Book Value Per Common Share $ 11.44 $ 11.14 $ 10.73 Less: Effects of Intangible Assets (0.11) (0.11) (0.11) Tangible Book Value Per Common Share $ 11.33 $ 11.03 $ 10.62 Return on Average Tangible Common Equity Net Income Available to Common Shareholders $ 13,500 $ 11,868 $ 11,509 $ 36,617 $ 33,173 Average Shareholders' Equity $ 384,020 $ 381,448 $ 330,604 $ 382,834 $ 296,760 Less: Average Preferred Stock (66,514) (66,514) (32,332) (66,514) (10,896) Average Common Equity 317,506 314,934 298,272 316,320 285,864 Less: Effects of Average Intangible Assets (2,989) (3,037) (3,180) (3,036) (3,227) Average Tangible Common Equity $ 314,517 $ 311,897 $ 295,092 $ 313,284 $ 282,637 Return on Average Tangible Common Equity 17.03 % 15.26 % 15.47 % 15.63 % 15.69 % Three Months Ended September 30, June 30, March 31, December 31, September 30, 2022 2022 2022 2021 2021 Tangible Common Equity Total Shareholders' Equity $ 382,007 $ 374,883 $ 379,441 $ 379,272 $ 367,803 Less: Preferred Stock (66,514) (66,514) (66,514) (66,514) (66,515) Common Shareholders' Equity 315,493 308,369 312,927 312,758 301,288 Less: Intangible Assets (2,962) (3,009) (3,057) (3,105) (3,153) Tangible Common Equity $ 312,531 $ 305,360 $ 309,870 $ 309,653 $ 298,135 View source version on businesswire.com: https://www.businesswire.com/news/home/20221026005659/en/Contacts Media Contact: Jessica Stejskal | SVP Marketing Jessica.stejskal@bwbmn.com | 952.893.6860 Investor Contact: Justin Horstman | Director of Investor Relations Justin.Horstman@bwbmn.com | 952.542.5169 Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. 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Bridgewater Bancshares, Inc. Announces Record Third Quarter 2022 Net Income of $14.5 Million, $0.47 Diluted Earnings Per Common Share By: Bridgewater Bancshares, Inc. via Business Wire October 27, 2022 at 07:05 AM EDT Bridgewater Bancshares, Inc. (Nasdaq: BWB) (the Company), the parent company of Bridgewater Bank (the Bank), today announced record net income of $14.5 million for the third quarter of 2022, a 12.7% increase over net income of $12.9 million for the second quarter of 2022, and a 26.1% increase over net income of $11.5 million for the third quarter of 2021. Earnings per diluted common share for the third quarter of 2022 were $0.47, a 14.6% increase compared to $0.41 per diluted common share for the second quarter of 2022, and a 19.4% increase compared to $0.40 per diluted common share for the same period in 2021. “Bridgewater’s ability to produce consistent financial results remained evident in the third quarter with record pre-provision net revenue and continued growth of tangible book value per share,” said Chairman, Chief Executive Officer, and President, Jerry Baack. “Our impressive profitability was driven by robust loan growth, well controlled expenses and the hard work of our team members to expand and deepen our client relationships. “While the current economic environment creates an elevated level of uncertainty, we remain confident in our business model. As the rise in interest rates drives deposit costs higher and creates near-term net interest margin pressure, we believe our proven ability to grow the balance sheet can support our continued focus on overall revenue growth. Couple this with our superb credit quality and an efficiency ratio among the best in the industry and we have a story that is poised to continue driving sustained shareholder value.” Third Quarter 2022 Financial Results Diluted Adjusted Nonperforming ROA PPNR ROA (1) ROE earnings per share efficiency ratio (1) assets to total assets 1.46 % 2.15 % 14.99 % $ 0.47 39.4 % 0.02 % ________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. Third Quarter 2022 Highlights Diluted earnings per common share were $0.47, compared to $0.41 per common share for the second quarter of 2022. Tangible book value per share, a non-GAAP financial measure, increased $0.30, or 10.8% annualized, to $11.33, compared to $11.03 at June 30, 2022, despite the market value depreciation of the securities portfolio due to rapidly rising interest rates, which continues to negatively impact accumulated other comprehensive income. Record pre-provision net revenue (PPNR), a non-GAAP financial measure, of $21.4 million, compared to $20.4 million for the second quarter of 2022, an increase of $1.0 million, or 4.9%. PPNR ROA, a non-GAAP financial measure, was 2.15%, compared to 2.19% for the second quarter of 2022. Annualized return on average assets (ROA) and annualized return on average shareholders’ equity (ROE) for the third quarter of 2022 were 1.46% and 14.99%, compared to ROA and ROE of 1.38% and 13.55%, respectively, for the second quarter of 2022. Annualized return on average tangible common equity, a non-GAAP financial measure, was 17.03% for the third quarter of 2022, compared to 15.26% for the second quarter of 2022. Gross loans increased $154.2 million, or 19.0% annualized, from the end of the second quarter of 2022. Deposits increased $103.1 million, or 12.8% annualized, from the end of the second quarter of 2022. Net interest margin (on a fully tax-equivalent basis) was 3.53%, compared to 3.58% in the second quarter of 2022. 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, was 3.38%, compared to 3.34% in the second quarter of 2022. Adjusted efficiency ratio, a non-GAAP financial measure which excludes the impact of certain non-routine income and expenses from noninterest expense, was 39.4%, compared to 40.0% for the second quarter of 2022. A loan loss provision of $1.5 million was recorded to support strong organic loan growth. The allowance for loan losses to total loans was 1.38% at September 30, 2022, compared to 1.39% at June 30, 2022. Annualized net loan charge-offs (recoveries) as a percentage of average loans were (0.03)% for the third quarter of 2022, compared to 0.00% for the second quarter of 2022. Year-Over-Year Highlights Net income was $14.5 million for the third quarter of 2022, compared to $11.5 million for the third quarter of 2021, an increase of $3.0 million, or 26.1%. Diluted earnings per common share for the third quarter of 2022 were $0.47, compared to $0.40 for the third quarter of 2021, an increase of 19.4%. Net interest margin (on a fully tax-equivalent basis) was 3.53% for the third quarter of 2022 compared to 3.54% for the third quarter of 2021. Core net interest margin (on a fully tax-equivalent basis), a non-GAAP financial measure, was 3.38% for the third quarter of 2022, compared to 3.22% for the third quarter of 2021. Gross loans increased $668.1 million at September 30, 2022, or 24.6%, compared to September 30, 2021. Deposits increased $450.9 million at September 30, 2022, or 15.8%, compared to September 30, 2021. Key Financial Measures As of and for the Three Months Ended As of and for the Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2022 2022 2021 2022 2021 Per Common Share Data Basic Earnings Per Share $ 0.49 $ 0.43 $ 0.41 $ 1.32 $ 1.18 Diluted Earnings Per Share 0.47 0.41 0.40 1.27 1.14 Book Value Per Share 11.44 11.14 10.73 11.44 10.73 Tangible Book Value Per Share (1) 11.33 11.03 10.62 11.33 10.62 Basic Weighted Average Shares Outstanding 27,520,117 27,839,260 28,047,280 27,825,517 28,035,246 Diluted Weighted Average Shares Outstanding 28,592,854 28,803,842 29,110,547 28,882,701 29,077,850 Shares Outstanding at Period End 27,587,978 27,677,372 28,066,822 27,587,978 28,066,822 Selected Performance Ratios Return on Average Assets (Annualized) 1.46 % 1.38 % 1.37 % 1.42 % 1.42 % Pre-Provision Net Revenue Return on Average Assets (Annualized) (1) 2.15 2.19 2.09 2.15 2.10 Return on Average Shareholders' Equity (Annualized) 14.99 13.55 13.81 13.85 14.95 Return on Average Tangible Common Equity (Annualized) (1) 17.03 15.26 15.47 15.63 15.69 Yield on Interest Earning Assets(2) 4.37 4.16 4.14 4.23 4.20 Yield on Total Loans, Gross(2) 4.59 4.45 4.65 4.50 4.65 Cost of Total Deposits 0.73 0.46 0.48 0.55 0.53 Cost of Funds 0.93 0.63 0.65 0.73 0.70 Net Interest Margin (2) 3.53 3.58 3.54 3.57 3.55 Core Net Interest Margin (1)(2) 3.38 3.34 3.22 3.36 3.29 Efficiency Ratio (1) 39.8 40.2 43.9 40.7 42.4 Adjusted Efficiency Ratio (1) 39.4 40.0 41.5 40.4 41.3 Noninterest Expense to Average Assets (Annualized) 1.42 1.47 1.58 1.48 1.53 Adjusted Noninterest Expense to Average Assets (Annualized) (1) 1.41 1.47 1.49 1.47 1.49 Loan to Deposit Ratio 102.3 100.7 95.0 Core Deposits to Total Deposits (3) 83.0 82.9 83.3 Tangible Common Equity to Tangible Assets (1) 7.57 7.87 8.81 Capital Ratios (Bank Only) (4) Tier 1 Leverage Ratio 11.24 % 11.43 % 10.96 % Common Equity Tier 1 Risk-based Capital Ratio 11.46 11.53 11.88 Tier 1 Risk-based Capital Ratio 11.46 11.53 11.88 Total Risk-based Capital Ratio 12.67 12.74 13.13 Capital Ratios (Consolidated) (4) Tier 1 Leverage Ratio 9.98 % 10.33 % 10.70 % Common Equity Tier 1 Risk-based Capital Ratio 8.47 8.50 9.47 Tier 1 Risk-based Capital Ratio 10.19 10.29 11.65 Total Risk-based Capital Ratio 13.78 13.98 15.93 ________________________________ (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 September 30, June 30, March 31, December 31, September 30, (dollars in thousands) 2022 2022 2022 2021 2021 Selected Balance Sheet Data Total Assets $ 4,128,987 $ 3,883,264 $ 3,607,920 $ 3,477,659 $ 3,389,125 Total Loans, Gross 3,380,082 3,225,885 2,987,967 2,819,472 2,712,012 Allowance for Loan Losses 46,491 44,711 41,692 40,020 38,901 Goodwill and Other Intangibles 2,962 3,009 3,057 3,105 3,153 Deposits 3,305,074 3,201,953 3,035,611 2,946,237 2,854,157 Tangible Common Equity (1) 312,531 305,360 309,870 309,653 298,135 Total Shareholders' Equity 382,007 374,883 379,441 379,272 367,803 Average Total Assets - Quarter-to-Date 3,948,201 3,743,575 3,513,798 3,403,270 3,332,301 Average Shareholders' Equity - Quarter-to-Date 384,020 381,448 383,024 374,035 330,604 ________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. For the Three Months Ended For the Nine Months Ended September 30, June 30, September 30, September 30, September 30, (dollars in thousands) 2022 2022 2021 2022 2021 Selected Income Statement Data Interest Income $ 42,359 $ 37,782 $ 33,517 $ 114,835 $ 95,104 Interest Expense 8,264 5,252 4,844 18,030 14,748 Net Interest Income 34,095 32,530 28,673 96,805 80,356 Provision for Loan Losses 1,500 3,025 1,300 6,200 4,000 Net Interest Income after Provision for Loan Losses 32,595 29,505 27,373 90,605 76,356 Noninterest Income 1,387 1,650 1,410 4,594 4,021 Noninterest Expense 14,157 13,752 13,236 41,417 35,636 Income Before Income Taxes 19,825 17,403 15,547 53,782 44,741 Provision for Income Taxes 5,312 4,521 4,038 14,125 11,568 Net Income 14,513 12,882 11,509 39,657 33,173 Preferred Stock Dividends (1,013) (1,014) — (3,040) — Net Income Available to Common Shareholders $ 13,500 $ 11,868 $ 11,509 $ 36,617 $ 33,173 Income Statement Net Interest Income Net interest income was $34.1 million for the third quarter of 2022, an increase of $1.6 million, or 4.8%, from $32.5 million in the second quarter of 2022, and an increase of $5.4 million, or 18.9%, from $28.7 million in the third quarter of 2021. The linked-quarter increase in net interest income was primarily due to growth in average interest earning assets and higher yields on investment securities and loans, offset partially by higher rates paid on deposits. The year-over-year increase in net interest income was primarily due to growth in average interest earning assets and higher yields on investment securities and core loans, offset partially by higher rates paid on deposits and lower PPP fee recognition. Average interest earning assets were $3.87 billion for the third quarter of 2022, an increase of $200.1 million, or 5.5%, from $3.67 billion for the second quarter of 2022, and an increase of $637.6 million, or 19.7%, from $3.23 billion for the third quarter of 2021. The linked-quarter and year-over-year increases in average interest earning assets were primarily due to strong organic growth in the loan portfolio and continued purchases of investment securities, offset partially by the forgiveness of PPP loans and the reduction of cash balances. Net interest margin (on a fully tax-equivalent basis) for the third quarter of 2022 was 3.53%, a five basis point decrease from 3.58% in the second quarter of 2022, and a modest one basis point decline from 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, for the third quarter of 2022 was 3.38%, a four basis point increase from 3.34% in the second quarter of 2022, and a 16 basis point increase from 3.22% in the third quarter of 2021. The Company remains focused on managing the impact of continued interest rate hikes and the evolving shape of the yield curve during this unique interest rate environment. As the PPP loan portfolio has almost fully paid off, the recognition of fees associated with the originations has decreased significantly, which impacts comparability between periods. The Company recognized $90,000 of PPP origination fees during the third quarter of 2022, compared to $244,000 during the second quarter of 2022, and $1.6 million during the third quarter of 2021. Remaining PPP origination fees to be recognized as of September 30, 2022 were $45,000. Interest income was $42.4 million for the third quarter of 2022, an increase of $4.6 million, or 12.1%, from $37.8 million in the second quarter of 2022, and an increase of $8.8 million, or 26.4%, from $33.5 million in the third quarter of 2021. The yield on interest earning assets (on a fully tax-equivalent basis) was 4.37% in the third quarter of 2022, compared to 4.16% in the second quarter of 2022, and 4.14% in the third quarter of 2021. The linked-quarter expansion in the yield on interest earning assets was primarily due to the rapid increase in market interest rates resulting in new loan originations and investment purchases at yields accretive to the existing portfolios. The year-over-year increase in the yield on interest earning assets was primarily due to growth and repricing of the loan and securities portfolios in the rising interest rate environment, offset partially by the lower recognition of PPP origination fees. Loan interest income and loan fees remain the primary contributing factors to the changes in the yield on interest earning assets. The aggregate loan yield, excluding PPP loans, increased to 4.59% in the third quarter of 2022, which was 16 basis points higher than 4.43% in the second quarter of 2022, and eight basis points higher than 4.51% in the third quarter of 2021. While loan fees have maintained a relatively stable contribution to the aggregate loan yield, the current period was impacted by fewer loan prepayments, which historically has accelerated the recognition of loan fees. Despite the decrease in fee recognition, the Company is encouraged that the core loan yield continues to rise as new loan originations and the existing portfolio reprice in the higher rate environment. A summary of interest and fees recognized on loans, excluding PPP loans, for the periods indicated is as follows: Three Months Ended September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 Interest 4.42 % 4.17 % 4.15 % 4.20 % 4.28 % Fees 0.17 0.26 0.25 0.21 0.23 Yield on Loans, Excluding PPP Loans 4.59 % 4.43 % 4.40 % 4.41 % 4.51 % Interest expense was $8.3 million for the third quarter of 2022, an increase of $3.0 million, or 57.3%, from $5.3 million in the second quarter of 2022, and an increase of $3.4 million, or 70.6%, from $4.8 million in the third quarter of 2021. The cost of interest bearing liabilities increased 44 basis points on a linked-quarter basis from 0.86% in the second quarter of 2022 to 1.30% in the third quarter of 2022, primarily due to the rapid increase in market interest rates that occurred during the quarter. On a year-over-year basis, the cost of interest bearing liabilities increased 42 basis points from 0.88% in the third quarter of 2021 to 1.30% in the third quarter of 2022, primarily due to higher rates paid on deposits and the increased utilization of federal funds purchased and FHLB advances in the rising interest rate environment. Interest expense on deposits was $6.0 million for the third quarter of 2022, an increase of $2.5 million, or 73.1%, from $3.5 million in the second quarter of 2022, and an increase of $2.6 million, or 75.1%, from $3.4 million in the third quarter of 2021. The cost of total deposits increased 27 basis points on a linked-quarter basis from 0.46% in the second quarter of 2022, to 0.73% in the third quarter of 2022, primarily due to the rapid increase in rates in 2022. On a year-over-year basis, the cost of total deposits increased 25 basis points from 0.48% in the third quarter of 2021, to 0.73% in the third quarter of 2022, primarily due to the upward repricing of the deposit portfolio in the higher interest rate environment. A summary of the Company’s average balances, interest yields and rates, and net interest margin for the three months ended September 30, 2022, June 30, 2022, and September 30, 2021 is as follows: For the Three Months Ended September 30, 2022 June 30, 2022 September 30, 2021 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 $ 57,613 $ 165 1.13 % $ 61,046 $ 40 0.26 % $ 187,405 $ 67 0.14 % Investment Securities: Taxable Investment Securities 461,255 3,741 3.22 417,142 2,696 2.59 314,367 1,751 2.21 Tax-Exempt Investment Securities (1) 75,801 799 4.18 74,261 795 4.30 71,801 737 4.07 Total Investment Securities 537,056 4,540 3.35 491,403 3,491 2.85 386,168 2,488 2.56 Paycheck Protection Program Loans (2) 2,424 96 15.75 8,335 263 12.67 76,006 1,753 9.15 Loans (1)(2) 3,263,390 37,724 4.59 3,099,344 34,205 4.43 2,579,021 29,348 4.51 Total Loans 3,265,814 37,820 4.59 3,107,679 34,468 4.45 2,655,027 31,101 4.65 Federal Home Loan Bank Stock 11,413 156 5.42 11,620 59 2.04 5,701 68 4.65 Total Interest Earning Assets 3,871,896 42,681 4.37 % 3,671,748 38,058 4.16 % 3,234,301 33,724 4.14 % Noninterest Earning Assets 76,305 71,827 98,000 Total Assets $ 3,948,201 $ 3,743,575 $ 3,332,301 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 517,658 $ 1,032 0.79 % $ 552,502 $ 694 0.50 % $ 479,580 $ 562 0.47 % Savings and Money Market Deposits 999,932 2,494 0.99 925,354 1,185 0.51 801,354 904 0.45 Time Deposits 288,621 847 1.16 280,645 665 0.95 318,222 928 1.16 Brokered Deposits 447,034 1,612 1.43 403,931 912 0.91 440,167 1,023 0.92 Total Interest Bearing Deposits 2,253,245 5,985 1.05 2,162,432 3,456 0.64 2,039,323 3,417 0.66 Federal Funds Purchased 106,826 709 2.63 137,379 410 1.20 — — — FHLB Advances 72,343 328 1.80 47,511 167 1.41 54,130 213 1.56 Subordinated Debentures 92,503 1,242 5.33 92,396 1,219 5.29 91,337 1,214 5.27 Total Interest Bearing Liabilities 2,524,917 8,264 1.30 % 2,439,718 5,252 0.86 % 2,184,790 4,844 0.88 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 991,545 882,477 784,148 Other Noninterest Bearing Liabilities 47,719 39,932 32,759 Total Noninterest Bearing Liabilities 1,039,264 922,409 816,907 Shareholders' Equity 384,020 381,448 330,604 Total Liabilities and Shareholders' Equity $ 3,948,201 $ 3,743,575 $ 3,332,301 Net Interest Income / Interest Rate Spread 34,417 3.07 % 32,806 3.30 % 28,880 3.26 % Net Interest Margin (3) 3.53 % 3.58 % 3.54 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities and Loans (322) (276) (207) Net Interest Income $ 34,095 $ 32,530 $ 28,673 ________________________________ (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 $1.5 million for the third quarter of 2022, a decrease of $1.5 million from $3.0 million for the second quarter of 2022, and an increase of $200,000 from $1.3 million for the third quarter of 2021. The provision recorded in the third quarter of 2022 was primarily attributable to the strong growth of the loan portfolio. The allowance for loan losses to total loans was 1.38% at September 30, 2022, compared to 1.39% at June 30, 2022, and 1.43% at September 30, 2021. 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 Nine Months Ended September 30, June 30, September 30, September 30, September 30, (dollars in thousands) 2022 2022 2021 2022 2021 Balance at Beginning of Period $ 44,711 $ 41,692 $ 37,591 $ 40,020 $ 34,841 Provision for Loan Losses 1,500 3,025 1,300 6,200 4,000 Charge-offs (5) (14) (20) (34) (37) Recoveries 285 8 30 305 97 Balance at End of Period $ 46,491 $ 44,711 $ 38,901 $ 46,491 $ 38,901 Noninterest Income Noninterest income was $1.4 million for the third quarter of 2022, a decrease of $263,000 from $1.7 million for the second quarter of 2022, and a decrease of $23,000 from $1.4 million for the third quarter of 2021. The linked-quarter decrease was primarily due to a decrease in letter of credit fees and other income, offset partially by an increase in bank-owned life insurance income. The year-over-year decrease was primarily due to decreased letter of credit fees and gains on sales of securities, offset partially by an increase in bank-owned life insurance income. The following table presents the major components of noninterest income for the periods indicated: Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, September 30, (dollars in thousands) 2022 2022 2021 2022 2021 Noninterest Income: Customer Service Fees $ 313 $ 298 $ 268 $ 892 $ 733 Net Gain on Sales of Securities — 52 48 52 750 Letter of Credit Fees 428 564 577 1,234 1,135 Debit Card Interchange Fees 153 152 143 438 414 Swap Fees — — — 557 — Bank-Owned Life Insurance 227 149 166 524 166 Other Income 266 435 208 897 823 Totals $ 1,387 $ 1,650 $ 1,410 $ 4,594 $ 4,021 Noninterest Expense Noninterest expense was $14.2 million for the third quarter of 2022, an increase of $405,000 from $13.8 million for the second quarter of 2022, and an increase of $921,000 from $13.2 million for the third quarter of 2021. The linked-quarter increase was primarily due to an increase in salaries and employee benefits and technology expenses, offset partially by a decrease in professional and consulting fees, marketing and advertising expenses, and other expenses. The year-over-year increase was primarily attributable to increases in salaries and employee benefits, occupancy and equipment, and other expenses, offset partially by a decrease in debt prepayment fees. The following table presents the major components of noninterest expense for the periods indicated: Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, September 30, (dollars in thousands) 2022 2022 2021 2022 2021 Noninterest Expense: Salaries and Employee Benefits $ 9,449 $ 8,977 $ 8,309 $ 27,120 $ 22,923 Occupancy and Equipment 1,086 1,042 942 3,213 2,977 FDIC Insurance Assessment 315 330 355 1,005 960 Data Processing 372 356 325 1,025 916 Professional and Consulting Fees 716 769 708 2,181 1,804 Information Technology and Telecommunications 650 594 598 1,822 1,609 Marketing and Advertising 479 524 418 1,629 1,018 Intangible Asset Amortization 48 47 48 143 143 Amortization of Tax Credit Investments 114 63 152 294 410 Debt Prepayment Fees — — 582 — 582 Other Expense 928 1,050 799 2,985 2,294 Totals $ 14,157 $ 13,752 $ 13,236 $ 41,417 $ 35,636 The Company continues to add key talent across the organization, reaching 246 full-time equivalent employees at September 30, 2022, compared to 236 employees at June 30, 2022, and 219 employees at September 30, 2021. The efficiency ratio, a non-GAAP financial measure, was 39.8% for the third quarter of 2022, compared to 40.2% for the second quarter of 2022, and 43.9% for the third quarter of 2021. Excluding the impact of certain non-routine income and expenses, the adjusted efficiency ratio, a non-GAAP financial measure, was 39.4% for the third quarter of 2022, 40.0% for the second quarter of 2022 and 41.5% for the third quarter of 2021. Income Taxes The effective combined federal and state income tax rate for the third quarter of 2022 was 26.8%, a slight increase from 26.0% for the second quarter of 2022 and 26.0% for the third quarter of 2021. Balance Sheet Total assets at September 30, 2022 were $4.13 billion, a 6.3% increase from $3.88 billion at June 30, 2022, and a 21.8% increase from $3.39 billion at September 30, 2021. The linked-quarter increase in total assets was primarily due to strong organic loan growth and continued purchases of investment securities. The year-over-year increase in total assets was primarily due to robust organic loan growth and purchases of investment securities, offset partially by a decrease in cash and cash equivalents. Total gross loans at September 30, 2022 were $3.38 billion, an increase of $154.2 million, or 4.8%, over total gross loans of $3.23 billion at June 30, 2022, and an increase of $668.1 million, or 24.6%, over total gross loans of $2.71 billion at September 30, 2021. The increase in the loan portfolio during the third quarter of 2022 was primarily due to growth in the commercial and multifamily segments, offset partially by a decrease in the construction and land development segment which was the result of completed construction projects migrating to permanent financing. While the Company’s loan growth in the third quarter of 2022 remained strong, the pace began to moderate slightly, compared to the first half of 2022 due to active balance sheet management to align loan growth with the funding outlook, sales of participations on larger originations to manage growth, and the impact of the higher interest rate environment on the number of deals that made financial sense. The following table presents the dollar composition of the Company’s loan portfolio, by category, at the dates indicated: September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 (dollars in thousands) Commercial $ 412,448 $ 403,569 $ 363,290 $ 360,169 $ 350,081 Paycheck Protection Program 1,192 4,860 12,309 26,162 54,190 Construction and Land Development 335,557 359,191 321,131 281,474 257,167 Real Estate Mortgage: 1 - 4 Family Mortgage 341,102 334,815 312,201 305,317 290,535 Multifamily 1,230,509 1,087,865 1,012,623 910,243 865,172 CRE Owner Occupied 151,088 142,214 117,969 111,096 101,834 CRE Nonowner Occupied 900,691 886,432 840,463 818,569 786,271 Total Real Estate Mortgage Loans 2,623,390 2,451,326 2,283,256 2,145,225 2,043,812 Consumer and Other 7,495 6,939 7,981 6,442 6,762 Total Loans, Gross 3,380,082 3,225,885 2,987,967 2,819,472 2,712,012 Allowance for Loan Losses (46,491) (44,711) (41,692) (40,020) (38,901) Net Deferred Loan Fees (9,088) (9,536) (9,065) (9,535) (10,199) Total Loans, Net $ 3,324,503 $ 3,171,638 $ 2,937,210 $ 2,769,917 $ 2,662,912 Total deposits at September 30, 2022 were $3.31 billion, an increase of $103.1 million, or 3.2%, over total deposits of $3.20 billion at June 30, 2022, and an increase of $450.9 million, or 15.8%, over total deposits of $2.85 billion at September 30, 2021. Deposit growth in the third quarter of 2022 was primarily due to an increase in savings and money market deposits and time deposits, offset partially by a decline in interest bearing transaction deposits and brokered deposits. In addition to the continued growth of core deposits, brokered deposits are also being used as a supplemental funding source, as needed, for the robust loan portfolio growth. Given the rapid rise in interest rates in 2022 and the prospect for more, 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: September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 (dollars in thousands) Noninterest Bearing Transaction Deposits $ 961,084 $ 961,998 $ 835,482 $ 875,084 $ 846,490 Interest Bearing Transaction Deposits 510,396 522,151 598,402 544,789 488,785 Savings and Money Market Deposits 1,077,333 952,138 890,926 863,567 791,861 Time Deposits 293,052 272,424 286,674 293,474 309,824 Brokered Deposits 463,209 493,242 424,127 369,323 417,197 Total Deposits $ 3,305,074 $ 3,201,953 $ 3,035,611 $ 2,946,237 $ 2,854,157 Capital Total shareholders’ equity at September 30, 2022 was $382.0 million, an increase of $7.1 million compared to total shareholders’ equity of $374.9 million at June 30, 2022, and an increase of $14.2 million, or 3.9%, over total shareholders’ equity of $367.8 million at September 30, 2021. The linked-quarter increase was due to net income retained and unrealized gains in the derivatives portfolio, offset partially by unrealized losses in the securities portfolio. The year-over-year increase was due to net income retained and unrealized gains in the derivatives portfolio, offset partially by an increase in stock repurchases made under the Company’s stock repurchase program and an increase in unrealized losses in the securities portfolio. During the third quarter of 2022, the Company repurchased 99,310 shares of its common stock. Shares were repurchased at a weighted average price of $16.27 per share, for a total of $1.6 million. On August 18, 2022, the Company announced that its board of directors approved a new stock repurchase program which authorizes the Company to repurchase up to $25.0 million of its common stock, subject to certain limitations and conditions. The new stock repurchase program replaced and superseded the $40.0 million stock repurchase program, under which approximately $1.6 million remained. As of September 30, 2022, no shares have been repurchased under the new plan. The Company remains committed to maintaining strong capital levels while enhancing shareholder value as it strategically executes its stock repurchase program based on various factors including valuation, capital levels and other uses of capital. Tangible book value per share, a non-GAAP financial measure, was $11.33 as of September 30, 2022, an increase of 2.7% from $11.03 as of June 30, 2022, and an increase of 6.6% from $10.62 as of September 30, 2021. The linked-quarter and year-over-year increase occurred despite the market value depreciation of the securities portfolio driven by the rapidly rising interest rate environment, which continues to negatively impact accumulated other comprehensive income. Tangible common equity as a percentage of tangible assets, a non-GAAP financial measure, was 7.57% at September 30, 2022, compared to 7.87% at June 30, 2022, and 8.81% at September 30, 2021. Today the Company 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 December 1, 2022 to shareholders of record of the Series A Preferred Stock at the close of business on November 15, 2022. Asset Quality Annualized net charge-offs (recoveries) as a percent of average loans were (0.03)% for the third quarter of 2022, compared to 0.00% for each of the previous four quarters. At September 30, 2022, the Company’s nonperforming assets, which include nonaccrual loans, loans past due 90 days and still accruing, and foreclosed assets, were $663,000, or 0.02% of total assets, as compared to $688,000, or 0.02% of total assets at June 30, 2022, and $734,000, or 0.02% of total assets at September 30, 2021. Loans that have potential weaknesses that warrant a watchlist risk rating at September 30, 2022 totaled $22.8 million, compared to $34.7 million at June 30, 2022, and $67.4 million at September 30, 2021. The linked-quarter decrease was primarily due to the migration of one relationship to substandard and the payoff of one other relationship. Loans that warranted a substandard risk rating at September 30, 2022 totaled $30.8 million, compared to $27.0 million at June 30, 2022, and $7.7 million at September 30, 2021. The following table presents a summary of asset quality measurements at the dates indicated: As of and for the Three Months Ended September 30, June 30, March 31, December 31, September 30, (dollars in thousands) 2022 2022 2022 2021 2021 Selected Asset Quality Data Loans 30-89 Days Past Due $ 38 $ 225 $ 13 $ 49 $ 18 Loans 30-89 Days Past Due to Total Loans 0.00 % 0.01 % 0.00 % 0.00 % 0.00 % Nonperforming Loans $ 663 $ 688 $ 706 $ 722 $ 734 Nonperforming Loans to Total Loans 0.02 % 0.02 % 0.02 % 0.03 % 0.03 % Foreclosed Assets $ — $ — $ — $ — $ — Nonaccrual Loans to Total Loans 0.02 % 0.02 % 0.02 % 0.03 % 0.03 % Nonaccrual Loans and Loans Past Due 90 Days and Still Accruing to Total Loans 0.02 0.02 0.02 0.03 0.03 Nonperforming Assets (1) $ 663 $ 688 $ 706 $ 722 $ 734 Nonperforming Assets to Total Assets (1) 0.02 % 0.02 % 0.02 % 0.02 % 0.02 % Allowance for Loan Losses to Total Loans 1.38 1.39 1.40 1.42 1.43 Allowance for Loan Losses to Total Loans, Excluding PPP Loans 1.38 1.39 1.40 1.43 1.46 Allowance for Loans Losses to Nonaccrual Loans 7,012.22 6,498.69 5,905.38 5,542.94 5,299.86 Net Loan Charge-Offs (Recoveries) (Annualized) to Average Loans (0.03) 0.00 0.00 0.00 0.00 ________________________________ (1) Nonperforming assets are defined as nonaccrual loans plus loans 90 days past due and still accruing plus foreclosed assets. During the COVID-19 pandemic, the Company developed programs for clients who experienced business and personal disruptions 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 one modified loan totaling $10.6 million outstanding as of September 30, 2022, representing 0.3% of the total loan portfolio, excluding PPP loans, which is down from $29.8 million at June 30, 2022. 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 successful 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 $4.1 billion and seven branches as of September 30, 2022, 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: interest rate risk, including the effects of recent and anticipated rate increases by the Federal Reserve; fluctuations in the values of the securities held in our securities portfolio, including as the result of rising interest rates; business and economic conditions generally and in the financial services industry, nationally and within our market area, including rising rates of inflation; 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; 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; 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 including the Russian invasion of Ukraine; 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 the new 1% excise tax on stock buybacks by publicly traded companies; 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) September 30, December 31, September 30, 2022 2021 2021 (Unaudited) (Unaudited) ASSETS Cash and Cash Equivalents $ 75,496 $ 143,473 $ 189,502 Bank-Owned Certificates of Deposit 1,182 1,876 1,877 Securities Available for Sale, at Fair Value 542,007 439,362 413,149 Loans, Net of Allowance for Loan Losses of $46,491 at September 30, 2022 (unaudited), $40,020 at December 31, 2021 and $38,901 at September 30, 2021 (unaudited) 3,324,503 2,769,917 2,662,912 Federal Home Loan Bank (FHLB) Stock, at Cost 15,603 5,242 5,442 Premises and Equipment, Net 48,941 49,395 49,803 Accrued Interest 11,198 9,186 8,550 Goodwill 2,626 2,626 2,626 Other Intangible Assets, Net 336 479 527 Other Assets 107,095 56,103 54,737 Total Assets $ 4,128,987 $ 3,477,659 $ 3,389,125 LIABILITIES AND EQUITY LIABILITIES Deposits: Noninterest Bearing $ 961,084 $ 875,084 $ 846,490 Interest Bearing 2,343,990 2,071,153 2,007,667 Total Deposits 3,305,074 2,946,237 2,854,157 Federal Funds Purchased 212,000 — — FHLB Advances 71,500 42,500 47,500 Subordinated Debentures, Net of Issuance Costs 92,559 92,239 92,153 Accrued Interest Payable 2,214 1,409 1,656 Other Liabilities 63,633 16,002 25,856 Total Liabilities 3,746,980 3,098,387 3,021,322 SHAREHOLDERS' EQUITY Preferred Stock- $0.01 par value; Authorized 10,000,000 Preferred Stock - Issued and Outstanding 27,600 Series A shares ($2,500 liquidation preference) at September 30, 2022 (unaudited), December 31, 2021, and September 30, 2021 (unaudited) 66,514 66,514 66,515 Common Stock- $0.01 par value; Authorized 75,000,000 Common Stock - Issued and Outstanding 27,587,978 at September 30, 2022 (unaudited), 28,206,566 at December 31, 2021 and 28,066,822 at September 30, 2021 (unaudited) 276 282 281 Additional Paid-In Capital 95,973 104,123 103,471 Retained Earnings 235,964 199,347 188,004 Accumulated Other Comprehensive Income (Loss) (16,720) 9,006 9,532 Total Shareholders' Equity 382,007 379,272 367,803 Total Liabilities and Equity $ 4,128,987 $ 3,477,659 $ 3,389,125 Bridgewater Bancshares, Inc. and Subsidiaries Consolidated Statements of Income (dollars in thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended September 30, June 30 September 30, September 30, September 30, 2022 2022 2021 2022 2021 INTEREST INCOME Loans, Including Fees $ 37,666 $ 34,358 $ 31,049 $ 103,768 $ 87,705 Investment Securities 4,372 3,325 2,333 10,567 7,065 Other 321 99 135 500 334 Total Interest Income 42,359 37,782 33,517 114,835 95,104 INTEREST EXPENSE Deposits 5,984 3,456 3,417 12,598 10,601 Notes Payable — — — — 61 FHLB Advances 329 167 213 646 669 Subordinated Debentures 1,242 1,219 1,214 3,658 3,411 Federal Funds Purchased 709 410 — 1,128 6 Total Interest Expense 8,264 5,252 4,844 18,030 14,748 NET INTEREST INCOME 34,095 32,530 28,673 96,805 80,356 Provision for Loan Losses 1,500 3,025 1,300 6,200 4,000 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 32,595 29,505 27,373 90,605 76,356 NONINTEREST INCOME Customer Service Fees 313 298 268 892 733 Net Gain on Sales of Available for Sale Securities — 52 48 52 750 Other Income 1,074 1,300 1,094 3,650 2,538 Total Noninterest Income 1,387 1,650 1,410 4,594 4,021 NONINTEREST EXPENSE Salaries and Employee Benefits 9,449 8,977 8,309 27,120 22,923 Occupancy and Equipment 1,086 1,042 942 3,213 2,977 Other Expense 3,622 3,733 3,985 11,084 9,736 Total Noninterest Expense 14,157 13,752 13,236 41,417 35,636 INCOME BEFORE INCOME TAXES 19,825 17,403 15,547 53,782 44,741 Provision for Income Taxes 5,312 4,521 4,038 14,125 11,568 NET INCOME 14,513 12,882 11,509 39,657 33,173 Preferred Stock Dividends (1,013) (1,014) — (3,040) — NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 13,500 $ 11,868 $ 11,509 $ 36,617 $ 33,173 EARNINGS PER SHARE Basic $ 0.49 $ 0.43 $ 0.41 $ 1.32 $ 1.18 Diluted 0.47 0.41 0.40 1.27 1.14 Bridgewater Bancshares, Inc. and Subsidiaries Analysis of Average Balances, Yields and Rates (dollars in thousands, except per share data) (Unaudited) For the Nine Months Ended September 30, 2022 September 30, 2021 Average Interest Yield/ Average Interest Yield/ Balance & Fees Rate Balance & Fees Rate (dollars in thousands) Interest Earning Assets: Cash Investments $ 66,301 $ 231 0.47 % $ 127,283 $ 134 0.14 % Investment Securities: Taxable Investment Securities 417,462 8,692 2.78 310,078 5,122 2.21 Tax-Exempt Investment Securities (1) 73,900 2,373 4.29 76,564 2,460 4.30 Total Investment Securities 491,362 11,065 3.01 386,642 7,582 2.62 Paycheck Protection Program Loans (2) 9,575 922 12.88 124,466 5,384 5.78 Loans (1)(2) 3,082,924 103,204 4.48 2,402,844 82,433 4.59 Total Loans 3,092,499 104,126 4.50 2,527,310 87,817 4.65 Federal Home Loan Bank Stock 9,593 269 3.75 5,658 200 4.71 Total Interest Earning Assets 3,659,755 115,691 4.23 % 3,046,893 95,733 4.20 % Noninterest Earning Assets 77,028 70,968 Total Assets $ 3,736,783 $ 3,117,861 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 545,301 $ 2,322 0.57 % $ 422,000 $ 1,504 0.48 % Savings and Money Market Deposits 934,408 4,597 0.66 763,646 2,853 0.50 Time Deposits 286,059 2,257 1.05 331,664 3,269 1.32 Brokered Deposits 419,352 3,422 1.09 407,680 2,975 0.98 Total Interest Bearing Deposits 2,185,120 12,598 0.77 1,924,990 10,601 0.74 Federal Funds Purchased 85,287 1,128 1.77 3,311 6 0.24 Notes Payable — — — 2,216 61 3.66 FHLB Advances 54,227 646 1.59 56,364 669 1.59 Subordinated Debentures 92,396 3,658 5.29 79,723 3,411 5.72 Total Interest Bearing Liabilities 2,417,030 18,030 1.00 % 2,066,604 14,748 0.95 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 899,456 731,269 Other Noninterest Bearing Liabilities 37,463 23,228 Total Noninterest Bearing Liabilities 936,919 754,497 Shareholders' Equity 382,834 296,760 Total Liabilities and Shareholders' Equity $ 3,736,783 $ 3,117,861 Net Interest Income / Interest Rate Spread 97,661 3.23 % 80,985 3.25 % Net Interest Margin (3) 3.57 % 3.55 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities and Loans (856) (629) Net Interest Income $ 96,805 $ 80,356 ________________________________ (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. Bridgewater Bancshares, Inc. and Subsidiaries Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended For the Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2022 2022 2021 2022 2021 Pre-Provision Net Revenue Noninterest Income $ 1,387 $ 1,650 $ 1,410 $ 4,594 $ 4,021 Less: Gain on Sales of Securities — (52) (48) (52) (750) Total Operating Noninterest Income 1,387 1,598 1,362 4,542 3,271 Plus: Net Interest Income 34,095 32,530 28,673 96,805 80,356 Net Operating Revenue $ 35,482 $ 34,128 $ 30,035 $ 101,347 $ 83,627 Noninterest Expense $ 14,157 $ 13,752 $ 13,236 $ 41,417 $ 35,636 Less: Amortization of Tax Credit Investments (114) (63) (152) (294) (410) Total Operating Noninterest Expense $ 14,043 $ 13,689 $ 12,502 $ 41,123 $ 34,644 Pre-Provision Net Revenue $ 21,439 $ 20,439 $ 17,533 $ 60,224 $ 48,983 Plus: Non-Operating Revenue Adjustments — 52 48 52 750 Less: Provision for Loan Losses 1,500 3,025 1,300 6,200 4,000 Non-Operating Expense Adjustments 114 63 734 294 992 Provision for Income Taxes 5,312 4,521 4,038 14,125 11,568 Net Income $ 14,513 $ 12,882 $ 11,509 $ 39,657 $ 33,173 Average Assets $ 3,948,201 $ 3,743,575 $ 3,332,301 $ 3,736,783 $ 3,117,861 Pre-Provision Net Revenue Return on Average Assets 2.15 % 2.19 % 2.09 % 2.15 % 2.10 % As of and for the Three Months Ended As of and for the Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2022 2022 2021 2022 2021 Core Net Interest Margin Net Interest Income (Tax-Equivalent Basis) $ 34,417 $ 32,806 $ 28,880 $ 97,662 $ 80,985 Less: Loan Fees (1,400) (2,030) (1,487) (5,173) (3,712) Less: PPP Interest and Fees (96) (263) (1,753) (922) (5,384) Core Net Interest Income $ 32,921 $ 30,513 $ 25,640 $ 91,567 $ 71,889 Average Interest Earning Assets $ 3,871,896 $ 3,671,748 $ 3,234,301 $ 3,659,755 $ 3,046,893 Less: Average PPP Loans (2,424) (8,335) (76,006) (9,575) (124,466) Core Average Interest Earning Assets $ 3,869,472 $ 3,663,413 $ 3,158,295 $ 3,650,180 $ 2,922,427 Core Net Interest Margin 3.38 % 3.34 % 3.22 % 3.35 % 3.29 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended For the Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2022 2022 2021 2022 2021 Efficiency Ratio Noninterest Expense $ 14,157 $ 13,752 $ 13,236 $ 41,417 $ 35,636 Less: Amortization of Intangible Assets (48) (47) (48) (143) (143) Adjusted Noninterest Expense $ 14,109 $ 13,705 $ 13,188 $ 41,274 $ 35,493 Net Interest Income 34,095 32,530 28,673 96,805 80,356 Noninterest Income 1,387 1,650 1,410 4,594 4,021 Less: Gain on Sales of Securities — (52) (48) (52) (750) Adjusted Operating Revenue $ 35,482 $ 34,128 $ 30,035 $ 101,347 $ 83,627 Efficiency Ratio 39.8 % 40.2 % 43.9 % 40.7 % 42.4 % Adjusted Efficiency Ratio Noninterest Expense $ 14,157 $ 13,752 $ 13,236 $ 41,417 $ 35,636 Less: Amortization of Tax Credit Investments (114) (63) (152) (294) (410) Less: Debt Prepayment Fees — — (582) — (582) Less: Amortization of Intangible Assets (48) (47) (48) (143) (143) Adjusted Noninterest Expense $ 13,995 $ 13,642 $ 12,454 $ 40,980 $ 34,501 Net Interest Income 34,095 32,530 28,673 96,805 80,356 Noninterest Income 1,387 1,650 1,410 4,594 4,021 Less: Gain on Sales of Securities — (52) (48) (52) (750) Adjusted Operating Revenue $ 35,482 $ 34,128 $ 30,035 $ 101,347 $ 83,627 Adjusted Efficiency Ratio 39.4 % 40.0 % 41.5 % 40.4 % 41.3 % For the Three Months Ended For the Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2022 2022 2021 2022 2021 Adjusted Noninterest Expense to Average Assets (Annualized) Noninterest Expense $ 14,157 $ 13,752 $ 13,236 $ 41,417 $ 35,636 Less: Amortization of Tax Credit Investments (114) (63) (152) (294) (410) Less: Debt Prepayment Fees — — (582) — (582) Adjusted Noninterest Expense $ 14,043 $ 13,689 $ 12,502 $ 41,123 $ 34,644 Average Assets $ 3,948,201 $ 3,743,575 $ 3,332,301 $ 3,736,783 $ 3,117,861 Adjusted Noninterest Expense to Average Assets (Annualized) 1.41 % 1.47 % 1.49 % 1.47 % 1.49 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) As of and for the Three Months Ended As of and for the Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2022 2022 2021 2022 2021 Tangible Common Equity and Tangible Common Equity/Tangible Assets Total Shareholders' Equity $ 382,007 $ 374,883 $ 367,803 Less: Preferred Stock (66,514) (66,514) (66,515) Total Common Shareholders' Equity 315,493 308,369 301,288 Less: Intangible Assets (2,962) (3,009) (3,153) Tangible Common Equity $ 312,531 $ 305,360 $ 298,135 Total Assets $ 4,128,987 $ 3,883,264 $ 3,389,125 Less: Intangible Assets (2,962) (3,009) (3,153) Tangible Assets $ 4,126,025 $ 3,880,255 $ 3,385,972 Tangible Common Equity/Tangible Assets 7.57 % 7.87 % 8.81 % Tangible Book Value Per Share Book Value Per Common Share $ 11.44 $ 11.14 $ 10.73 Less: Effects of Intangible Assets (0.11) (0.11) (0.11) Tangible Book Value Per Common Share $ 11.33 $ 11.03 $ 10.62 Return on Average Tangible Common Equity Net Income Available to Common Shareholders $ 13,500 $ 11,868 $ 11,509 $ 36,617 $ 33,173 Average Shareholders' Equity $ 384,020 $ 381,448 $ 330,604 $ 382,834 $ 296,760 Less: Average Preferred Stock (66,514) (66,514) (32,332) (66,514) (10,896) Average Common Equity 317,506 314,934 298,272 316,320 285,864 Less: Effects of Average Intangible Assets (2,989) (3,037) (3,180) (3,036) (3,227) Average Tangible Common Equity $ 314,517 $ 311,897 $ 295,092 $ 313,284 $ 282,637 Return on Average Tangible Common Equity 17.03 % 15.26 % 15.47 % 15.63 % 15.69 % Three Months Ended September 30, June 30, March 31, December 31, September 30, 2022 2022 2022 2021 2021 Tangible Common Equity Total Shareholders' Equity $ 382,007 $ 374,883 $ 379,441 $ 379,272 $ 367,803 Less: Preferred Stock (66,514) (66,514) (66,514) (66,514) (66,515) Common Shareholders' Equity 315,493 308,369 312,927 312,758 301,288 Less: Intangible Assets (2,962) (3,009) (3,057) (3,105) (3,153) Tangible Common Equity $ 312,531 $ 305,360 $ 309,870 $ 309,653 $ 298,135 View source version on businesswire.com: https://www.businesswire.com/news/home/20221026005659/en/Contacts Media Contact: Jessica Stejskal | SVP Marketing Jessica.stejskal@bwbmn.com | 952.893.6860 Investor Contact: Justin Horstman | Director of Investor Relations Justin.Horstman@bwbmn.com | 952.542.5169
Bridgewater Bancshares, Inc. (Nasdaq: BWB) (the Company), the parent company of Bridgewater Bank (the Bank), today announced record net income of $14.5 million for the third quarter of 2022, a 12.7% increase over net income of $12.9 million for the second quarter of 2022, and a 26.1% increase over net income of $11.5 million for the third quarter of 2021. Earnings per diluted common share for the third quarter of 2022 were $0.47, a 14.6% increase compared to $0.41 per diluted common share for the second quarter of 2022, and a 19.4% increase compared to $0.40 per diluted common share for the same period in 2021. “Bridgewater’s ability to produce consistent financial results remained evident in the third quarter with record pre-provision net revenue and continued growth of tangible book value per share,” said Chairman, Chief Executive Officer, and President, Jerry Baack. “Our impressive profitability was driven by robust loan growth, well controlled expenses and the hard work of our team members to expand and deepen our client relationships. “While the current economic environment creates an elevated level of uncertainty, we remain confident in our business model. As the rise in interest rates drives deposit costs higher and creates near-term net interest margin pressure, we believe our proven ability to grow the balance sheet can support our continued focus on overall revenue growth. Couple this with our superb credit quality and an efficiency ratio among the best in the industry and we have a story that is poised to continue driving sustained shareholder value.” Third Quarter 2022 Financial Results Diluted Adjusted Nonperforming ROA PPNR ROA (1) ROE earnings per share efficiency ratio (1) assets to total assets 1.46 % 2.15 % 14.99 % $ 0.47 39.4 % 0.02 % ________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. Third Quarter 2022 Highlights Diluted earnings per common share were $0.47, compared to $0.41 per common share for the second quarter of 2022. Tangible book value per share, a non-GAAP financial measure, increased $0.30, or 10.8% annualized, to $11.33, compared to $11.03 at June 30, 2022, despite the market value depreciation of the securities portfolio due to rapidly rising interest rates, which continues to negatively impact accumulated other comprehensive income. Record pre-provision net revenue (PPNR), a non-GAAP financial measure, of $21.4 million, compared to $20.4 million for the second quarter of 2022, an increase of $1.0 million, or 4.9%. PPNR ROA, a non-GAAP financial measure, was 2.15%, compared to 2.19% for the second quarter of 2022. Annualized return on average assets (ROA) and annualized return on average shareholders’ equity (ROE) for the third quarter of 2022 were 1.46% and 14.99%, compared to ROA and ROE of 1.38% and 13.55%, respectively, for the second quarter of 2022. Annualized return on average tangible common equity, a non-GAAP financial measure, was 17.03% for the third quarter of 2022, compared to 15.26% for the second quarter of 2022. Gross loans increased $154.2 million, or 19.0% annualized, from the end of the second quarter of 2022. Deposits increased $103.1 million, or 12.8% annualized, from the end of the second quarter of 2022. Net interest margin (on a fully tax-equivalent basis) was 3.53%, compared to 3.58% in the second quarter of 2022. 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, was 3.38%, compared to 3.34% in the second quarter of 2022. Adjusted efficiency ratio, a non-GAAP financial measure which excludes the impact of certain non-routine income and expenses from noninterest expense, was 39.4%, compared to 40.0% for the second quarter of 2022. A loan loss provision of $1.5 million was recorded to support strong organic loan growth. The allowance for loan losses to total loans was 1.38% at September 30, 2022, compared to 1.39% at June 30, 2022. Annualized net loan charge-offs (recoveries) as a percentage of average loans were (0.03)% for the third quarter of 2022, compared to 0.00% for the second quarter of 2022. Year-Over-Year Highlights Net income was $14.5 million for the third quarter of 2022, compared to $11.5 million for the third quarter of 2021, an increase of $3.0 million, or 26.1%. Diluted earnings per common share for the third quarter of 2022 were $0.47, compared to $0.40 for the third quarter of 2021, an increase of 19.4%. Net interest margin (on a fully tax-equivalent basis) was 3.53% for the third quarter of 2022 compared to 3.54% for the third quarter of 2021. Core net interest margin (on a fully tax-equivalent basis), a non-GAAP financial measure, was 3.38% for the third quarter of 2022, compared to 3.22% for the third quarter of 2021. Gross loans increased $668.1 million at September 30, 2022, or 24.6%, compared to September 30, 2021. Deposits increased $450.9 million at September 30, 2022, or 15.8%, compared to September 30, 2021. Key Financial Measures As of and for the Three Months Ended As of and for the Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2022 2022 2021 2022 2021 Per Common Share Data Basic Earnings Per Share $ 0.49 $ 0.43 $ 0.41 $ 1.32 $ 1.18 Diluted Earnings Per Share 0.47 0.41 0.40 1.27 1.14 Book Value Per Share 11.44 11.14 10.73 11.44 10.73 Tangible Book Value Per Share (1) 11.33 11.03 10.62 11.33 10.62 Basic Weighted Average Shares Outstanding 27,520,117 27,839,260 28,047,280 27,825,517 28,035,246 Diluted Weighted Average Shares Outstanding 28,592,854 28,803,842 29,110,547 28,882,701 29,077,850 Shares Outstanding at Period End 27,587,978 27,677,372 28,066,822 27,587,978 28,066,822 Selected Performance Ratios Return on Average Assets (Annualized) 1.46 % 1.38 % 1.37 % 1.42 % 1.42 % Pre-Provision Net Revenue Return on Average Assets (Annualized) (1) 2.15 2.19 2.09 2.15 2.10 Return on Average Shareholders' Equity (Annualized) 14.99 13.55 13.81 13.85 14.95 Return on Average Tangible Common Equity (Annualized) (1) 17.03 15.26 15.47 15.63 15.69 Yield on Interest Earning Assets(2) 4.37 4.16 4.14 4.23 4.20 Yield on Total Loans, Gross(2) 4.59 4.45 4.65 4.50 4.65 Cost of Total Deposits 0.73 0.46 0.48 0.55 0.53 Cost of Funds 0.93 0.63 0.65 0.73 0.70 Net Interest Margin (2) 3.53 3.58 3.54 3.57 3.55 Core Net Interest Margin (1)(2) 3.38 3.34 3.22 3.36 3.29 Efficiency Ratio (1) 39.8 40.2 43.9 40.7 42.4 Adjusted Efficiency Ratio (1) 39.4 40.0 41.5 40.4 41.3 Noninterest Expense to Average Assets (Annualized) 1.42 1.47 1.58 1.48 1.53 Adjusted Noninterest Expense to Average Assets (Annualized) (1) 1.41 1.47 1.49 1.47 1.49 Loan to Deposit Ratio 102.3 100.7 95.0 Core Deposits to Total Deposits (3) 83.0 82.9 83.3 Tangible Common Equity to Tangible Assets (1) 7.57 7.87 8.81 Capital Ratios (Bank Only) (4) Tier 1 Leverage Ratio 11.24 % 11.43 % 10.96 % Common Equity Tier 1 Risk-based Capital Ratio 11.46 11.53 11.88 Tier 1 Risk-based Capital Ratio 11.46 11.53 11.88 Total Risk-based Capital Ratio 12.67 12.74 13.13 Capital Ratios (Consolidated) (4) Tier 1 Leverage Ratio 9.98 % 10.33 % 10.70 % Common Equity Tier 1 Risk-based Capital Ratio 8.47 8.50 9.47 Tier 1 Risk-based Capital Ratio 10.19 10.29 11.65 Total Risk-based Capital Ratio 13.78 13.98 15.93 ________________________________ (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 September 30, June 30, March 31, December 31, September 30, (dollars in thousands) 2022 2022 2022 2021 2021 Selected Balance Sheet Data Total Assets $ 4,128,987 $ 3,883,264 $ 3,607,920 $ 3,477,659 $ 3,389,125 Total Loans, Gross 3,380,082 3,225,885 2,987,967 2,819,472 2,712,012 Allowance for Loan Losses 46,491 44,711 41,692 40,020 38,901 Goodwill and Other Intangibles 2,962 3,009 3,057 3,105 3,153 Deposits 3,305,074 3,201,953 3,035,611 2,946,237 2,854,157 Tangible Common Equity (1) 312,531 305,360 309,870 309,653 298,135 Total Shareholders' Equity 382,007 374,883 379,441 379,272 367,803 Average Total Assets - Quarter-to-Date 3,948,201 3,743,575 3,513,798 3,403,270 3,332,301 Average Shareholders' Equity - Quarter-to-Date 384,020 381,448 383,024 374,035 330,604 ________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. For the Three Months Ended For the Nine Months Ended September 30, June 30, September 30, September 30, September 30, (dollars in thousands) 2022 2022 2021 2022 2021 Selected Income Statement Data Interest Income $ 42,359 $ 37,782 $ 33,517 $ 114,835 $ 95,104 Interest Expense 8,264 5,252 4,844 18,030 14,748 Net Interest Income 34,095 32,530 28,673 96,805 80,356 Provision for Loan Losses 1,500 3,025 1,300 6,200 4,000 Net Interest Income after Provision for Loan Losses 32,595 29,505 27,373 90,605 76,356 Noninterest Income 1,387 1,650 1,410 4,594 4,021 Noninterest Expense 14,157 13,752 13,236 41,417 35,636 Income Before Income Taxes 19,825 17,403 15,547 53,782 44,741 Provision for Income Taxes 5,312 4,521 4,038 14,125 11,568 Net Income 14,513 12,882 11,509 39,657 33,173 Preferred Stock Dividends (1,013) (1,014) — (3,040) — Net Income Available to Common Shareholders $ 13,500 $ 11,868 $ 11,509 $ 36,617 $ 33,173 Income Statement Net Interest Income Net interest income was $34.1 million for the third quarter of 2022, an increase of $1.6 million, or 4.8%, from $32.5 million in the second quarter of 2022, and an increase of $5.4 million, or 18.9%, from $28.7 million in the third quarter of 2021. The linked-quarter increase in net interest income was primarily due to growth in average interest earning assets and higher yields on investment securities and loans, offset partially by higher rates paid on deposits. The year-over-year increase in net interest income was primarily due to growth in average interest earning assets and higher yields on investment securities and core loans, offset partially by higher rates paid on deposits and lower PPP fee recognition. Average interest earning assets were $3.87 billion for the third quarter of 2022, an increase of $200.1 million, or 5.5%, from $3.67 billion for the second quarter of 2022, and an increase of $637.6 million, or 19.7%, from $3.23 billion for the third quarter of 2021. The linked-quarter and year-over-year increases in average interest earning assets were primarily due to strong organic growth in the loan portfolio and continued purchases of investment securities, offset partially by the forgiveness of PPP loans and the reduction of cash balances. Net interest margin (on a fully tax-equivalent basis) for the third quarter of 2022 was 3.53%, a five basis point decrease from 3.58% in the second quarter of 2022, and a modest one basis point decline from 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, for the third quarter of 2022 was 3.38%, a four basis point increase from 3.34% in the second quarter of 2022, and a 16 basis point increase from 3.22% in the third quarter of 2021. The Company remains focused on managing the impact of continued interest rate hikes and the evolving shape of the yield curve during this unique interest rate environment. As the PPP loan portfolio has almost fully paid off, the recognition of fees associated with the originations has decreased significantly, which impacts comparability between periods. The Company recognized $90,000 of PPP origination fees during the third quarter of 2022, compared to $244,000 during the second quarter of 2022, and $1.6 million during the third quarter of 2021. Remaining PPP origination fees to be recognized as of September 30, 2022 were $45,000. Interest income was $42.4 million for the third quarter of 2022, an increase of $4.6 million, or 12.1%, from $37.8 million in the second quarter of 2022, and an increase of $8.8 million, or 26.4%, from $33.5 million in the third quarter of 2021. The yield on interest earning assets (on a fully tax-equivalent basis) was 4.37% in the third quarter of 2022, compared to 4.16% in the second quarter of 2022, and 4.14% in the third quarter of 2021. The linked-quarter expansion in the yield on interest earning assets was primarily due to the rapid increase in market interest rates resulting in new loan originations and investment purchases at yields accretive to the existing portfolios. The year-over-year increase in the yield on interest earning assets was primarily due to growth and repricing of the loan and securities portfolios in the rising interest rate environment, offset partially by the lower recognition of PPP origination fees. Loan interest income and loan fees remain the primary contributing factors to the changes in the yield on interest earning assets. The aggregate loan yield, excluding PPP loans, increased to 4.59% in the third quarter of 2022, which was 16 basis points higher than 4.43% in the second quarter of 2022, and eight basis points higher than 4.51% in the third quarter of 2021. While loan fees have maintained a relatively stable contribution to the aggregate loan yield, the current period was impacted by fewer loan prepayments, which historically has accelerated the recognition of loan fees. Despite the decrease in fee recognition, the Company is encouraged that the core loan yield continues to rise as new loan originations and the existing portfolio reprice in the higher rate environment. A summary of interest and fees recognized on loans, excluding PPP loans, for the periods indicated is as follows: Three Months Ended September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 Interest 4.42 % 4.17 % 4.15 % 4.20 % 4.28 % Fees 0.17 0.26 0.25 0.21 0.23 Yield on Loans, Excluding PPP Loans 4.59 % 4.43 % 4.40 % 4.41 % 4.51 % Interest expense was $8.3 million for the third quarter of 2022, an increase of $3.0 million, or 57.3%, from $5.3 million in the second quarter of 2022, and an increase of $3.4 million, or 70.6%, from $4.8 million in the third quarter of 2021. The cost of interest bearing liabilities increased 44 basis points on a linked-quarter basis from 0.86% in the second quarter of 2022 to 1.30% in the third quarter of 2022, primarily due to the rapid increase in market interest rates that occurred during the quarter. On a year-over-year basis, the cost of interest bearing liabilities increased 42 basis points from 0.88% in the third quarter of 2021 to 1.30% in the third quarter of 2022, primarily due to higher rates paid on deposits and the increased utilization of federal funds purchased and FHLB advances in the rising interest rate environment. Interest expense on deposits was $6.0 million for the third quarter of 2022, an increase of $2.5 million, or 73.1%, from $3.5 million in the second quarter of 2022, and an increase of $2.6 million, or 75.1%, from $3.4 million in the third quarter of 2021. The cost of total deposits increased 27 basis points on a linked-quarter basis from 0.46% in the second quarter of 2022, to 0.73% in the third quarter of 2022, primarily due to the rapid increase in rates in 2022. On a year-over-year basis, the cost of total deposits increased 25 basis points from 0.48% in the third quarter of 2021, to 0.73% in the third quarter of 2022, primarily due to the upward repricing of the deposit portfolio in the higher interest rate environment. A summary of the Company’s average balances, interest yields and rates, and net interest margin for the three months ended September 30, 2022, June 30, 2022, and September 30, 2021 is as follows: For the Three Months Ended September 30, 2022 June 30, 2022 September 30, 2021 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 $ 57,613 $ 165 1.13 % $ 61,046 $ 40 0.26 % $ 187,405 $ 67 0.14 % Investment Securities: Taxable Investment Securities 461,255 3,741 3.22 417,142 2,696 2.59 314,367 1,751 2.21 Tax-Exempt Investment Securities (1) 75,801 799 4.18 74,261 795 4.30 71,801 737 4.07 Total Investment Securities 537,056 4,540 3.35 491,403 3,491 2.85 386,168 2,488 2.56 Paycheck Protection Program Loans (2) 2,424 96 15.75 8,335 263 12.67 76,006 1,753 9.15 Loans (1)(2) 3,263,390 37,724 4.59 3,099,344 34,205 4.43 2,579,021 29,348 4.51 Total Loans 3,265,814 37,820 4.59 3,107,679 34,468 4.45 2,655,027 31,101 4.65 Federal Home Loan Bank Stock 11,413 156 5.42 11,620 59 2.04 5,701 68 4.65 Total Interest Earning Assets 3,871,896 42,681 4.37 % 3,671,748 38,058 4.16 % 3,234,301 33,724 4.14 % Noninterest Earning Assets 76,305 71,827 98,000 Total Assets $ 3,948,201 $ 3,743,575 $ 3,332,301 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 517,658 $ 1,032 0.79 % $ 552,502 $ 694 0.50 % $ 479,580 $ 562 0.47 % Savings and Money Market Deposits 999,932 2,494 0.99 925,354 1,185 0.51 801,354 904 0.45 Time Deposits 288,621 847 1.16 280,645 665 0.95 318,222 928 1.16 Brokered Deposits 447,034 1,612 1.43 403,931 912 0.91 440,167 1,023 0.92 Total Interest Bearing Deposits 2,253,245 5,985 1.05 2,162,432 3,456 0.64 2,039,323 3,417 0.66 Federal Funds Purchased 106,826 709 2.63 137,379 410 1.20 — — — FHLB Advances 72,343 328 1.80 47,511 167 1.41 54,130 213 1.56 Subordinated Debentures 92,503 1,242 5.33 92,396 1,219 5.29 91,337 1,214 5.27 Total Interest Bearing Liabilities 2,524,917 8,264 1.30 % 2,439,718 5,252 0.86 % 2,184,790 4,844 0.88 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 991,545 882,477 784,148 Other Noninterest Bearing Liabilities 47,719 39,932 32,759 Total Noninterest Bearing Liabilities 1,039,264 922,409 816,907 Shareholders' Equity 384,020 381,448 330,604 Total Liabilities and Shareholders' Equity $ 3,948,201 $ 3,743,575 $ 3,332,301 Net Interest Income / Interest Rate Spread 34,417 3.07 % 32,806 3.30 % 28,880 3.26 % Net Interest Margin (3) 3.53 % 3.58 % 3.54 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities and Loans (322) (276) (207) Net Interest Income $ 34,095 $ 32,530 $ 28,673 ________________________________ (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 $1.5 million for the third quarter of 2022, a decrease of $1.5 million from $3.0 million for the second quarter of 2022, and an increase of $200,000 from $1.3 million for the third quarter of 2021. The provision recorded in the third quarter of 2022 was primarily attributable to the strong growth of the loan portfolio. The allowance for loan losses to total loans was 1.38% at September 30, 2022, compared to 1.39% at June 30, 2022, and 1.43% at September 30, 2021. 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 Nine Months Ended September 30, June 30, September 30, September 30, September 30, (dollars in thousands) 2022 2022 2021 2022 2021 Balance at Beginning of Period $ 44,711 $ 41,692 $ 37,591 $ 40,020 $ 34,841 Provision for Loan Losses 1,500 3,025 1,300 6,200 4,000 Charge-offs (5) (14) (20) (34) (37) Recoveries 285 8 30 305 97 Balance at End of Period $ 46,491 $ 44,711 $ 38,901 $ 46,491 $ 38,901 Noninterest Income Noninterest income was $1.4 million for the third quarter of 2022, a decrease of $263,000 from $1.7 million for the second quarter of 2022, and a decrease of $23,000 from $1.4 million for the third quarter of 2021. The linked-quarter decrease was primarily due to a decrease in letter of credit fees and other income, offset partially by an increase in bank-owned life insurance income. The year-over-year decrease was primarily due to decreased letter of credit fees and gains on sales of securities, offset partially by an increase in bank-owned life insurance income. The following table presents the major components of noninterest income for the periods indicated: Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, September 30, (dollars in thousands) 2022 2022 2021 2022 2021 Noninterest Income: Customer Service Fees $ 313 $ 298 $ 268 $ 892 $ 733 Net Gain on Sales of Securities — 52 48 52 750 Letter of Credit Fees 428 564 577 1,234 1,135 Debit Card Interchange Fees 153 152 143 438 414 Swap Fees — — — 557 — Bank-Owned Life Insurance 227 149 166 524 166 Other Income 266 435 208 897 823 Totals $ 1,387 $ 1,650 $ 1,410 $ 4,594 $ 4,021 Noninterest Expense Noninterest expense was $14.2 million for the third quarter of 2022, an increase of $405,000 from $13.8 million for the second quarter of 2022, and an increase of $921,000 from $13.2 million for the third quarter of 2021. The linked-quarter increase was primarily due to an increase in salaries and employee benefits and technology expenses, offset partially by a decrease in professional and consulting fees, marketing and advertising expenses, and other expenses. The year-over-year increase was primarily attributable to increases in salaries and employee benefits, occupancy and equipment, and other expenses, offset partially by a decrease in debt prepayment fees. The following table presents the major components of noninterest expense for the periods indicated: Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, September 30, (dollars in thousands) 2022 2022 2021 2022 2021 Noninterest Expense: Salaries and Employee Benefits $ 9,449 $ 8,977 $ 8,309 $ 27,120 $ 22,923 Occupancy and Equipment 1,086 1,042 942 3,213 2,977 FDIC Insurance Assessment 315 330 355 1,005 960 Data Processing 372 356 325 1,025 916 Professional and Consulting Fees 716 769 708 2,181 1,804 Information Technology and Telecommunications 650 594 598 1,822 1,609 Marketing and Advertising 479 524 418 1,629 1,018 Intangible Asset Amortization 48 47 48 143 143 Amortization of Tax Credit Investments 114 63 152 294 410 Debt Prepayment Fees — — 582 — 582 Other Expense 928 1,050 799 2,985 2,294 Totals $ 14,157 $ 13,752 $ 13,236 $ 41,417 $ 35,636 The Company continues to add key talent across the organization, reaching 246 full-time equivalent employees at September 30, 2022, compared to 236 employees at June 30, 2022, and 219 employees at September 30, 2021. The efficiency ratio, a non-GAAP financial measure, was 39.8% for the third quarter of 2022, compared to 40.2% for the second quarter of 2022, and 43.9% for the third quarter of 2021. Excluding the impact of certain non-routine income and expenses, the adjusted efficiency ratio, a non-GAAP financial measure, was 39.4% for the third quarter of 2022, 40.0% for the second quarter of 2022 and 41.5% for the third quarter of 2021. Income Taxes The effective combined federal and state income tax rate for the third quarter of 2022 was 26.8%, a slight increase from 26.0% for the second quarter of 2022 and 26.0% for the third quarter of 2021. Balance Sheet Total assets at September 30, 2022 were $4.13 billion, a 6.3% increase from $3.88 billion at June 30, 2022, and a 21.8% increase from $3.39 billion at September 30, 2021. The linked-quarter increase in total assets was primarily due to strong organic loan growth and continued purchases of investment securities. The year-over-year increase in total assets was primarily due to robust organic loan growth and purchases of investment securities, offset partially by a decrease in cash and cash equivalents. Total gross loans at September 30, 2022 were $3.38 billion, an increase of $154.2 million, or 4.8%, over total gross loans of $3.23 billion at June 30, 2022, and an increase of $668.1 million, or 24.6%, over total gross loans of $2.71 billion at September 30, 2021. The increase in the loan portfolio during the third quarter of 2022 was primarily due to growth in the commercial and multifamily segments, offset partially by a decrease in the construction and land development segment which was the result of completed construction projects migrating to permanent financing. While the Company’s loan growth in the third quarter of 2022 remained strong, the pace began to moderate slightly, compared to the first half of 2022 due to active balance sheet management to align loan growth with the funding outlook, sales of participations on larger originations to manage growth, and the impact of the higher interest rate environment on the number of deals that made financial sense. The following table presents the dollar composition of the Company’s loan portfolio, by category, at the dates indicated: September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 (dollars in thousands) Commercial $ 412,448 $ 403,569 $ 363,290 $ 360,169 $ 350,081 Paycheck Protection Program 1,192 4,860 12,309 26,162 54,190 Construction and Land Development 335,557 359,191 321,131 281,474 257,167 Real Estate Mortgage: 1 - 4 Family Mortgage 341,102 334,815 312,201 305,317 290,535 Multifamily 1,230,509 1,087,865 1,012,623 910,243 865,172 CRE Owner Occupied 151,088 142,214 117,969 111,096 101,834 CRE Nonowner Occupied 900,691 886,432 840,463 818,569 786,271 Total Real Estate Mortgage Loans 2,623,390 2,451,326 2,283,256 2,145,225 2,043,812 Consumer and Other 7,495 6,939 7,981 6,442 6,762 Total Loans, Gross 3,380,082 3,225,885 2,987,967 2,819,472 2,712,012 Allowance for Loan Losses (46,491) (44,711) (41,692) (40,020) (38,901) Net Deferred Loan Fees (9,088) (9,536) (9,065) (9,535) (10,199) Total Loans, Net $ 3,324,503 $ 3,171,638 $ 2,937,210 $ 2,769,917 $ 2,662,912 Total deposits at September 30, 2022 were $3.31 billion, an increase of $103.1 million, or 3.2%, over total deposits of $3.20 billion at June 30, 2022, and an increase of $450.9 million, or 15.8%, over total deposits of $2.85 billion at September 30, 2021. Deposit growth in the third quarter of 2022 was primarily due to an increase in savings and money market deposits and time deposits, offset partially by a decline in interest bearing transaction deposits and brokered deposits. In addition to the continued growth of core deposits, brokered deposits are also being used as a supplemental funding source, as needed, for the robust loan portfolio growth. Given the rapid rise in interest rates in 2022 and the prospect for more, 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: September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 (dollars in thousands) Noninterest Bearing Transaction Deposits $ 961,084 $ 961,998 $ 835,482 $ 875,084 $ 846,490 Interest Bearing Transaction Deposits 510,396 522,151 598,402 544,789 488,785 Savings and Money Market Deposits 1,077,333 952,138 890,926 863,567 791,861 Time Deposits 293,052 272,424 286,674 293,474 309,824 Brokered Deposits 463,209 493,242 424,127 369,323 417,197 Total Deposits $ 3,305,074 $ 3,201,953 $ 3,035,611 $ 2,946,237 $ 2,854,157 Capital Total shareholders’ equity at September 30, 2022 was $382.0 million, an increase of $7.1 million compared to total shareholders’ equity of $374.9 million at June 30, 2022, and an increase of $14.2 million, or 3.9%, over total shareholders’ equity of $367.8 million at September 30, 2021. The linked-quarter increase was due to net income retained and unrealized gains in the derivatives portfolio, offset partially by unrealized losses in the securities portfolio. The year-over-year increase was due to net income retained and unrealized gains in the derivatives portfolio, offset partially by an increase in stock repurchases made under the Company’s stock repurchase program and an increase in unrealized losses in the securities portfolio. During the third quarter of 2022, the Company repurchased 99,310 shares of its common stock. Shares were repurchased at a weighted average price of $16.27 per share, for a total of $1.6 million. On August 18, 2022, the Company announced that its board of directors approved a new stock repurchase program which authorizes the Company to repurchase up to $25.0 million of its common stock, subject to certain limitations and conditions. The new stock repurchase program replaced and superseded the $40.0 million stock repurchase program, under which approximately $1.6 million remained. As of September 30, 2022, no shares have been repurchased under the new plan. The Company remains committed to maintaining strong capital levels while enhancing shareholder value as it strategically executes its stock repurchase program based on various factors including valuation, capital levels and other uses of capital. Tangible book value per share, a non-GAAP financial measure, was $11.33 as of September 30, 2022, an increase of 2.7% from $11.03 as of June 30, 2022, and an increase of 6.6% from $10.62 as of September 30, 2021. The linked-quarter and year-over-year increase occurred despite the market value depreciation of the securities portfolio driven by the rapidly rising interest rate environment, which continues to negatively impact accumulated other comprehensive income. Tangible common equity as a percentage of tangible assets, a non-GAAP financial measure, was 7.57% at September 30, 2022, compared to 7.87% at June 30, 2022, and 8.81% at September 30, 2021. Today the Company 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 December 1, 2022 to shareholders of record of the Series A Preferred Stock at the close of business on November 15, 2022. Asset Quality Annualized net charge-offs (recoveries) as a percent of average loans were (0.03)% for the third quarter of 2022, compared to 0.00% for each of the previous four quarters. At September 30, 2022, the Company’s nonperforming assets, which include nonaccrual loans, loans past due 90 days and still accruing, and foreclosed assets, were $663,000, or 0.02% of total assets, as compared to $688,000, or 0.02% of total assets at June 30, 2022, and $734,000, or 0.02% of total assets at September 30, 2021. Loans that have potential weaknesses that warrant a watchlist risk rating at September 30, 2022 totaled $22.8 million, compared to $34.7 million at June 30, 2022, and $67.4 million at September 30, 2021. The linked-quarter decrease was primarily due to the migration of one relationship to substandard and the payoff of one other relationship. Loans that warranted a substandard risk rating at September 30, 2022 totaled $30.8 million, compared to $27.0 million at June 30, 2022, and $7.7 million at September 30, 2021. The following table presents a summary of asset quality measurements at the dates indicated: As of and for the Three Months Ended September 30, June 30, March 31, December 31, September 30, (dollars in thousands) 2022 2022 2022 2021 2021 Selected Asset Quality Data Loans 30-89 Days Past Due $ 38 $ 225 $ 13 $ 49 $ 18 Loans 30-89 Days Past Due to Total Loans 0.00 % 0.01 % 0.00 % 0.00 % 0.00 % Nonperforming Loans $ 663 $ 688 $ 706 $ 722 $ 734 Nonperforming Loans to Total Loans 0.02 % 0.02 % 0.02 % 0.03 % 0.03 % Foreclosed Assets $ — $ — $ — $ — $ — Nonaccrual Loans to Total Loans 0.02 % 0.02 % 0.02 % 0.03 % 0.03 % Nonaccrual Loans and Loans Past Due 90 Days and Still Accruing to Total Loans 0.02 0.02 0.02 0.03 0.03 Nonperforming Assets (1) $ 663 $ 688 $ 706 $ 722 $ 734 Nonperforming Assets to Total Assets (1) 0.02 % 0.02 % 0.02 % 0.02 % 0.02 % Allowance for Loan Losses to Total Loans 1.38 1.39 1.40 1.42 1.43 Allowance for Loan Losses to Total Loans, Excluding PPP Loans 1.38 1.39 1.40 1.43 1.46 Allowance for Loans Losses to Nonaccrual Loans 7,012.22 6,498.69 5,905.38 5,542.94 5,299.86 Net Loan Charge-Offs (Recoveries) (Annualized) to Average Loans (0.03) 0.00 0.00 0.00 0.00 ________________________________ (1) Nonperforming assets are defined as nonaccrual loans plus loans 90 days past due and still accruing plus foreclosed assets. During the COVID-19 pandemic, the Company developed programs for clients who experienced business and personal disruptions 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 one modified loan totaling $10.6 million outstanding as of September 30, 2022, representing 0.3% of the total loan portfolio, excluding PPP loans, which is down from $29.8 million at June 30, 2022. 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 successful 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 $4.1 billion and seven branches as of September 30, 2022, 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: interest rate risk, including the effects of recent and anticipated rate increases by the Federal Reserve; fluctuations in the values of the securities held in our securities portfolio, including as the result of rising interest rates; business and economic conditions generally and in the financial services industry, nationally and within our market area, including rising rates of inflation; 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; 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; 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 including the Russian invasion of Ukraine; 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 the new 1% excise tax on stock buybacks by publicly traded companies; 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) September 30, December 31, September 30, 2022 2021 2021 (Unaudited) (Unaudited) ASSETS Cash and Cash Equivalents $ 75,496 $ 143,473 $ 189,502 Bank-Owned Certificates of Deposit 1,182 1,876 1,877 Securities Available for Sale, at Fair Value 542,007 439,362 413,149 Loans, Net of Allowance for Loan Losses of $46,491 at September 30, 2022 (unaudited), $40,020 at December 31, 2021 and $38,901 at September 30, 2021 (unaudited) 3,324,503 2,769,917 2,662,912 Federal Home Loan Bank (FHLB) Stock, at Cost 15,603 5,242 5,442 Premises and Equipment, Net 48,941 49,395 49,803 Accrued Interest 11,198 9,186 8,550 Goodwill 2,626 2,626 2,626 Other Intangible Assets, Net 336 479 527 Other Assets 107,095 56,103 54,737 Total Assets $ 4,128,987 $ 3,477,659 $ 3,389,125 LIABILITIES AND EQUITY LIABILITIES Deposits: Noninterest Bearing $ 961,084 $ 875,084 $ 846,490 Interest Bearing 2,343,990 2,071,153 2,007,667 Total Deposits 3,305,074 2,946,237 2,854,157 Federal Funds Purchased 212,000 — — FHLB Advances 71,500 42,500 47,500 Subordinated Debentures, Net of Issuance Costs 92,559 92,239 92,153 Accrued Interest Payable 2,214 1,409 1,656 Other Liabilities 63,633 16,002 25,856 Total Liabilities 3,746,980 3,098,387 3,021,322 SHAREHOLDERS' EQUITY Preferred Stock- $0.01 par value; Authorized 10,000,000 Preferred Stock - Issued and Outstanding 27,600 Series A shares ($2,500 liquidation preference) at September 30, 2022 (unaudited), December 31, 2021, and September 30, 2021 (unaudited) 66,514 66,514 66,515 Common Stock- $0.01 par value; Authorized 75,000,000 Common Stock - Issued and Outstanding 27,587,978 at September 30, 2022 (unaudited), 28,206,566 at December 31, 2021 and 28,066,822 at September 30, 2021 (unaudited) 276 282 281 Additional Paid-In Capital 95,973 104,123 103,471 Retained Earnings 235,964 199,347 188,004 Accumulated Other Comprehensive Income (Loss) (16,720) 9,006 9,532 Total Shareholders' Equity 382,007 379,272 367,803 Total Liabilities and Equity $ 4,128,987 $ 3,477,659 $ 3,389,125 Bridgewater Bancshares, Inc. and Subsidiaries Consolidated Statements of Income (dollars in thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended September 30, June 30 September 30, September 30, September 30, 2022 2022 2021 2022 2021 INTEREST INCOME Loans, Including Fees $ 37,666 $ 34,358 $ 31,049 $ 103,768 $ 87,705 Investment Securities 4,372 3,325 2,333 10,567 7,065 Other 321 99 135 500 334 Total Interest Income 42,359 37,782 33,517 114,835 95,104 INTEREST EXPENSE Deposits 5,984 3,456 3,417 12,598 10,601 Notes Payable — — — — 61 FHLB Advances 329 167 213 646 669 Subordinated Debentures 1,242 1,219 1,214 3,658 3,411 Federal Funds Purchased 709 410 — 1,128 6 Total Interest Expense 8,264 5,252 4,844 18,030 14,748 NET INTEREST INCOME 34,095 32,530 28,673 96,805 80,356 Provision for Loan Losses 1,500 3,025 1,300 6,200 4,000 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 32,595 29,505 27,373 90,605 76,356 NONINTEREST INCOME Customer Service Fees 313 298 268 892 733 Net Gain on Sales of Available for Sale Securities — 52 48 52 750 Other Income 1,074 1,300 1,094 3,650 2,538 Total Noninterest Income 1,387 1,650 1,410 4,594 4,021 NONINTEREST EXPENSE Salaries and Employee Benefits 9,449 8,977 8,309 27,120 22,923 Occupancy and Equipment 1,086 1,042 942 3,213 2,977 Other Expense 3,622 3,733 3,985 11,084 9,736 Total Noninterest Expense 14,157 13,752 13,236 41,417 35,636 INCOME BEFORE INCOME TAXES 19,825 17,403 15,547 53,782 44,741 Provision for Income Taxes 5,312 4,521 4,038 14,125 11,568 NET INCOME 14,513 12,882 11,509 39,657 33,173 Preferred Stock Dividends (1,013) (1,014) — (3,040) — NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 13,500 $ 11,868 $ 11,509 $ 36,617 $ 33,173 EARNINGS PER SHARE Basic $ 0.49 $ 0.43 $ 0.41 $ 1.32 $ 1.18 Diluted 0.47 0.41 0.40 1.27 1.14 Bridgewater Bancshares, Inc. and Subsidiaries Analysis of Average Balances, Yields and Rates (dollars in thousands, except per share data) (Unaudited) For the Nine Months Ended September 30, 2022 September 30, 2021 Average Interest Yield/ Average Interest Yield/ Balance & Fees Rate Balance & Fees Rate (dollars in thousands) Interest Earning Assets: Cash Investments $ 66,301 $ 231 0.47 % $ 127,283 $ 134 0.14 % Investment Securities: Taxable Investment Securities 417,462 8,692 2.78 310,078 5,122 2.21 Tax-Exempt Investment Securities (1) 73,900 2,373 4.29 76,564 2,460 4.30 Total Investment Securities 491,362 11,065 3.01 386,642 7,582 2.62 Paycheck Protection Program Loans (2) 9,575 922 12.88 124,466 5,384 5.78 Loans (1)(2) 3,082,924 103,204 4.48 2,402,844 82,433 4.59 Total Loans 3,092,499 104,126 4.50 2,527,310 87,817 4.65 Federal Home Loan Bank Stock 9,593 269 3.75 5,658 200 4.71 Total Interest Earning Assets 3,659,755 115,691 4.23 % 3,046,893 95,733 4.20 % Noninterest Earning Assets 77,028 70,968 Total Assets $ 3,736,783 $ 3,117,861 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 545,301 $ 2,322 0.57 % $ 422,000 $ 1,504 0.48 % Savings and Money Market Deposits 934,408 4,597 0.66 763,646 2,853 0.50 Time Deposits 286,059 2,257 1.05 331,664 3,269 1.32 Brokered Deposits 419,352 3,422 1.09 407,680 2,975 0.98 Total Interest Bearing Deposits 2,185,120 12,598 0.77 1,924,990 10,601 0.74 Federal Funds Purchased 85,287 1,128 1.77 3,311 6 0.24 Notes Payable — — — 2,216 61 3.66 FHLB Advances 54,227 646 1.59 56,364 669 1.59 Subordinated Debentures 92,396 3,658 5.29 79,723 3,411 5.72 Total Interest Bearing Liabilities 2,417,030 18,030 1.00 % 2,066,604 14,748 0.95 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 899,456 731,269 Other Noninterest Bearing Liabilities 37,463 23,228 Total Noninterest Bearing Liabilities 936,919 754,497 Shareholders' Equity 382,834 296,760 Total Liabilities and Shareholders' Equity $ 3,736,783 $ 3,117,861 Net Interest Income / Interest Rate Spread 97,661 3.23 % 80,985 3.25 % Net Interest Margin (3) 3.57 % 3.55 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities and Loans (856) (629) Net Interest Income $ 96,805 $ 80,356 ________________________________ (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. Bridgewater Bancshares, Inc. and Subsidiaries Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended For the Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2022 2022 2021 2022 2021 Pre-Provision Net Revenue Noninterest Income $ 1,387 $ 1,650 $ 1,410 $ 4,594 $ 4,021 Less: Gain on Sales of Securities — (52) (48) (52) (750) Total Operating Noninterest Income 1,387 1,598 1,362 4,542 3,271 Plus: Net Interest Income 34,095 32,530 28,673 96,805 80,356 Net Operating Revenue $ 35,482 $ 34,128 $ 30,035 $ 101,347 $ 83,627 Noninterest Expense $ 14,157 $ 13,752 $ 13,236 $ 41,417 $ 35,636 Less: Amortization of Tax Credit Investments (114) (63) (152) (294) (410) Total Operating Noninterest Expense $ 14,043 $ 13,689 $ 12,502 $ 41,123 $ 34,644 Pre-Provision Net Revenue $ 21,439 $ 20,439 $ 17,533 $ 60,224 $ 48,983 Plus: Non-Operating Revenue Adjustments — 52 48 52 750 Less: Provision for Loan Losses 1,500 3,025 1,300 6,200 4,000 Non-Operating Expense Adjustments 114 63 734 294 992 Provision for Income Taxes 5,312 4,521 4,038 14,125 11,568 Net Income $ 14,513 $ 12,882 $ 11,509 $ 39,657 $ 33,173 Average Assets $ 3,948,201 $ 3,743,575 $ 3,332,301 $ 3,736,783 $ 3,117,861 Pre-Provision Net Revenue Return on Average Assets 2.15 % 2.19 % 2.09 % 2.15 % 2.10 % As of and for the Three Months Ended As of and for the Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2022 2022 2021 2022 2021 Core Net Interest Margin Net Interest Income (Tax-Equivalent Basis) $ 34,417 $ 32,806 $ 28,880 $ 97,662 $ 80,985 Less: Loan Fees (1,400) (2,030) (1,487) (5,173) (3,712) Less: PPP Interest and Fees (96) (263) (1,753) (922) (5,384) Core Net Interest Income $ 32,921 $ 30,513 $ 25,640 $ 91,567 $ 71,889 Average Interest Earning Assets $ 3,871,896 $ 3,671,748 $ 3,234,301 $ 3,659,755 $ 3,046,893 Less: Average PPP Loans (2,424) (8,335) (76,006) (9,575) (124,466) Core Average Interest Earning Assets $ 3,869,472 $ 3,663,413 $ 3,158,295 $ 3,650,180 $ 2,922,427 Core Net Interest Margin 3.38 % 3.34 % 3.22 % 3.35 % 3.29 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended For the Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2022 2022 2021 2022 2021 Efficiency Ratio Noninterest Expense $ 14,157 $ 13,752 $ 13,236 $ 41,417 $ 35,636 Less: Amortization of Intangible Assets (48) (47) (48) (143) (143) Adjusted Noninterest Expense $ 14,109 $ 13,705 $ 13,188 $ 41,274 $ 35,493 Net Interest Income 34,095 32,530 28,673 96,805 80,356 Noninterest Income 1,387 1,650 1,410 4,594 4,021 Less: Gain on Sales of Securities — (52) (48) (52) (750) Adjusted Operating Revenue $ 35,482 $ 34,128 $ 30,035 $ 101,347 $ 83,627 Efficiency Ratio 39.8 % 40.2 % 43.9 % 40.7 % 42.4 % Adjusted Efficiency Ratio Noninterest Expense $ 14,157 $ 13,752 $ 13,236 $ 41,417 $ 35,636 Less: Amortization of Tax Credit Investments (114) (63) (152) (294) (410) Less: Debt Prepayment Fees — — (582) — (582) Less: Amortization of Intangible Assets (48) (47) (48) (143) (143) Adjusted Noninterest Expense $ 13,995 $ 13,642 $ 12,454 $ 40,980 $ 34,501 Net Interest Income 34,095 32,530 28,673 96,805 80,356 Noninterest Income 1,387 1,650 1,410 4,594 4,021 Less: Gain on Sales of Securities — (52) (48) (52) (750) Adjusted Operating Revenue $ 35,482 $ 34,128 $ 30,035 $ 101,347 $ 83,627 Adjusted Efficiency Ratio 39.4 % 40.0 % 41.5 % 40.4 % 41.3 % For the Three Months Ended For the Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2022 2022 2021 2022 2021 Adjusted Noninterest Expense to Average Assets (Annualized) Noninterest Expense $ 14,157 $ 13,752 $ 13,236 $ 41,417 $ 35,636 Less: Amortization of Tax Credit Investments (114) (63) (152) (294) (410) Less: Debt Prepayment Fees — — (582) — (582) Adjusted Noninterest Expense $ 14,043 $ 13,689 $ 12,502 $ 41,123 $ 34,644 Average Assets $ 3,948,201 $ 3,743,575 $ 3,332,301 $ 3,736,783 $ 3,117,861 Adjusted Noninterest Expense to Average Assets (Annualized) 1.41 % 1.47 % 1.49 % 1.47 % 1.49 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) As of and for the Three Months Ended As of and for the Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2022 2022 2021 2022 2021 Tangible Common Equity and Tangible Common Equity/Tangible Assets Total Shareholders' Equity $ 382,007 $ 374,883 $ 367,803 Less: Preferred Stock (66,514) (66,514) (66,515) Total Common Shareholders' Equity 315,493 308,369 301,288 Less: Intangible Assets (2,962) (3,009) (3,153) Tangible Common Equity $ 312,531 $ 305,360 $ 298,135 Total Assets $ 4,128,987 $ 3,883,264 $ 3,389,125 Less: Intangible Assets (2,962) (3,009) (3,153) Tangible Assets $ 4,126,025 $ 3,880,255 $ 3,385,972 Tangible Common Equity/Tangible Assets 7.57 % 7.87 % 8.81 % Tangible Book Value Per Share Book Value Per Common Share $ 11.44 $ 11.14 $ 10.73 Less: Effects of Intangible Assets (0.11) (0.11) (0.11) Tangible Book Value Per Common Share $ 11.33 $ 11.03 $ 10.62 Return on Average Tangible Common Equity Net Income Available to Common Shareholders $ 13,500 $ 11,868 $ 11,509 $ 36,617 $ 33,173 Average Shareholders' Equity $ 384,020 $ 381,448 $ 330,604 $ 382,834 $ 296,760 Less: Average Preferred Stock (66,514) (66,514) (32,332) (66,514) (10,896) Average Common Equity 317,506 314,934 298,272 316,320 285,864 Less: Effects of Average Intangible Assets (2,989) (3,037) (3,180) (3,036) (3,227) Average Tangible Common Equity $ 314,517 $ 311,897 $ 295,092 $ 313,284 $ 282,637 Return on Average Tangible Common Equity 17.03 % 15.26 % 15.47 % 15.63 % 15.69 % Three Months Ended September 30, June 30, March 31, December 31, September 30, 2022 2022 2022 2021 2021 Tangible Common Equity Total Shareholders' Equity $ 382,007 $ 374,883 $ 379,441 $ 379,272 $ 367,803 Less: Preferred Stock (66,514) (66,514) (66,514) (66,514) (66,515) Common Shareholders' Equity 315,493 308,369 312,927 312,758 301,288 Less: Intangible Assets (2,962) (3,009) (3,057) (3,105) (3,153) Tangible Common Equity $ 312,531 $ 305,360 $ 309,870 $ 309,653 $ 298,135 View source version on businesswire.com: https://www.businesswire.com/news/home/20221026005659/en/
Media Contact: Jessica Stejskal | SVP Marketing Jessica.stejskal@bwbmn.com | 952.893.6860 Investor Contact: Justin Horstman | Director of Investor Relations Justin.Horstman@bwbmn.com | 952.542.5169
