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 First Quarter 2023 Net Income of $11.6 Million, $0.37 Diluted Earnings Per Common Share By: Bridgewater Bancshares, Inc. via Business Wire April 26, 2023 at 16:15 PM EDT Bridgewater Bancshares, Inc. (Nasdaq: BWB) (the Company), the parent company of Bridgewater Bank (the Bank), today announced net income of $11.6 million for the first quarter of 2023, compared to $13.7 million for the fourth quarter of 2022, and $12.3 million for the first quarter of 2022. Earnings per diluted common share for the first quarter of 2023 were $0.37, compared to $0.45 per diluted common share for the fourth quarter of 2022, and $0.39 per diluted common share for the same period in 2022. “While first quarter results included well-controlled expenses, superb asset quality, moderated loan growth, and expected net interest margin pressure, our focus was on supporting our clients and demonstrating the resiliency of our balance sheet and business model,” said Chairman, Chief Executive Officer, and President, Jerry Baack. “Bridgewater is a relationship-focused bank supporting a local real estate and small business client base. With a strong balance sheet, including a diversified loan portfolio, high level of insured deposits, and ample liquidity and borrowing capacity, we feel well-positioned to continue executing on our proven and successful business model.” First Quarter 2023 Financial Results Diluted Nonperforming ROA PPNR ROA (1) ROE earnings per share Efficiency ratio (1) assets to total assets 1.07 % 1.49 % 11.70 % $ 0.37 46.2 % 0.02 % _____________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. First Quarter 2023 Highlights Annualized return on average assets (ROA) and annualized return on average shareholders’ equity (ROE) for the first quarter of 2023 were 1.07% and 11.70%, compared to ROA and ROE of 1.28% and 14.06%, respectively, for the fourth quarter of 2022. Annualized return on average tangible common equity, a non-GAAP financial measure, was 12.90% for the first quarter of 2023, compared to 15.86% for the fourth quarter of 2022. Gross loans increased $114.9 million, or 13.1% annualized, from the fourth quarter of 2022. Deposits decreased slightly by $5.4 million, or 0.6% annualized, from the fourth quarter of 2022. Net interest margin (on a fully tax-equivalent basis) was 2.72%, compared to 3.16% in the fourth quarter of 2022. Efficiency ratio, a non-GAAP financial measure, was 46.2%, compared to 43.8% for the fourth quarter of 2022. Noninterest expense declined $1.0 million, or 6.7%, from the fourth quarter of 2022. Annualized noninterest expense to average assets was 1.31%, compared to 1.42% for the fourth quarter of 2022. A credit loss provision of $1.5 million was recorded to support continued loan growth in the first quarter of 2023. The allowance for credit losses to total loans was 1.36% at March 31, 2023, compared to 1.34% at December 31, 2022. Annualized net loan charge-offs (recoveries) as a percentage of average loans were 0.00% for the first quarter of 2023 and for the fourth quarter of 2022. Tangible book value per share, a non-GAAP financial measure, increased $0.26, or 8.9% annualized, to $11.95 at March 31, 2023 compared to $11.69 at December 31, 2022. Key Financial Measures As of and for the Three Months Ended March 31, December 31, March 31, 2023 2022 2022 Per Common Share Data Basic Earnings Per Share $ 0.38 $ 0.46 $ 0.40 Diluted Earnings Per Share 0.37 0.45 0.39 Book Value Per Share 12.05 11.80 11.12 Tangible Book Value Per Share (1) 11.95 11.69 11.01 Basic Weighted Average Shares Outstanding 27,726,894 27,558,983 28,123,809 Diluted Weighted Average Shares Outstanding 28,490,046 28,527,306 29,156,085 Shares Outstanding at Period End 27,845,244 27,751,950 28,150,389 Selected Performance Ratios Return on Average Assets (Annualized) 1.07 % 1.28 % 1.42 % Pre-Provision Net Revenue Return on Average Assets (Annualized) (1) 1.49 1.82 2.12 Return on Average Shareholders' Equity (Annualized) 11.70 14.06 12.98 Return on Average Tangible Common Equity (Annualized) (1) 12.90 15.86 14.56 Yield on Interest Earning Assets (2) 4.91 4.67 4.13 Yield on Total Loans, Gross (2) 5.06 4.87 4.45 Cost of Total Deposits 2.01 1.31 0.43 Cost of Funds 2.41 1.67 0.59 Net Interest Margin (2) 2.72 3.16 3.60 Core Net Interest Margin (1)(2) 2.62 3.05 3.34 Efficiency Ratio (1) 46.2 43.8 42.4 Noninterest Expense to Average Assets (Annualized) 1.31 1.42 1.56 Loan to Deposit Ratio 108.0 104.5 98.4 Core Deposits to Total Deposits (3) 72.4 74.6 84.3 Tangible Common Equity to Tangible Assets (1) 7.23 7.48 8.60 Capital Ratios (Bank Only) (4) Tier 1 Leverage Ratio 10.61 % 10.76 % 11.13 % Common Equity Tier 1 Risk-based Capital Ratio 11.37 11.29 11.42 Tier 1 Risk-based Capital Ratio 11.37 11.29 11.42 Total Risk-based Capital Ratio 12.62 12.47 12.65 Capital Ratios (Consolidated) (4) Tier 1 Leverage Ratio 9.41 % 9.55 % 10.78 % Common Equity Tier 1 Risk-based Capital Ratio 8.48 8.40 9.13 Tier 1 Risk-based Capital Ratio 10.08 10.03 11.08 Total Risk-based Capital Ratio 13.25 13.15 15.02 _____________________________________ (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 March 31, December31, September 30, June 30, March 31, (dollars in thousands) 2023 2022 2022 2022 2022 Selected Balance Sheet Data Total Assets $ 4,602,899 $ 4,345,662 $ 4,128,987 $ 3,883,264 $ 3,607,920 Total Loans, Gross 3,684,360 3,569,446 3,380,082 3,225,885 2,987,967 Allowance for Credit Losses 50,148 47,996 46,491 44,711 41,692 Goodwill and Other Intangibles 2,866 2,914 2,962 3,009 3,057 Deposits 3,411,123 3,416,543 3,305,074 3,201,953 3,035,611 Tangible Common Equity (1) 332,626 324,636 312,531 305,360 309,870 Total Shareholders' Equity 402,006 394,064 382,007 374,883 379,441 Average Total Assets - Quarter-to-Date 4,405,234 4,251,345 3,948,201 3,743,575 3,513,798 Average Shareholders' Equity - Quarter-to-Date 403,533 387,589 384,020 381,448 383,024 _____________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. For the Three Months Ended March 31, December 31, March 31, (dollars in thousands) 2023 2022 2022 Selected Income Statement Data Interest Income $ 51,992 $ 48,860 $ 34,694 Interest Expense 23,425 15,967 4,514 Net Interest Income 28,567 32,893 30,180 Provision for Credit Losses 625 1,500 1,675 Net Interest Income after Provision for Credit Losses 27,942 31,393 28,505 Noninterest Income 1,943 1,738 1,557 Noninterest Expense 14,183 15,203 13,508 Income Before Income Taxes 15,702 17,928 16,554 Provision for Income Taxes 4,060 4,193 4,292 Net Income 11,642 13,735 12,262 Preferred Stock Dividends (1,013 ) (1,014 ) (1,013 ) Net Income Available to Common Shareholders $ 10,629 $ 12,721 $ 11,249 Income Statement Net Interest Income Net interest income was $28.6 million for the first quarter of 2023, a decrease of $4.3 million, or 13.2%, from $32.9 million in the fourth quarter of 2022, and a decrease of $1.6 million, or 5.3%, from $30.2 million in the first quarter of 2022. The linked-quarter and year-over-year decrease in net interest income was primarily due to higher rates paid on deposits and increased borrowings in the rising interest rate environment. Average interest earning assets were $4.32 billion for the first quarter of 2023, an increase of $146.1 million, or 3.5%, from $4.18 billion for the fourth quarter of 2022, and an increase of $892.9 million, or 26.0%, from $3.43 billion for the first quarter of 2022. The linked-quarter increase in average interest earning assets was primarily due to continued growth in the loan portfolio. The year-over-year increase in average interest earning assets was primarily due to strong growth in the loan portfolio and 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 first quarter of 2023 was 2.72%, a 44 basis point decrease from 3.16% in the fourth quarter of 2022, and an 88 basis point decrease from 3.60% in the first 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, for the first quarter of 2023 was 2.62%, a 43 basis point decrease from 3.05% in the fourth quarter of 2022, and a 72 basis point decrease from 3.34% in the first quarter of 2022. The decline in the margin when compared to both prior periods was primarily due to higher funding costs and increased borrowings in the rising interest rate environment, offset partially by higher earning asset yields. Interest income was $52.0 million for the first quarter of 2023, an increase of $3.1 million, or 6.4%, from $48.9 million in the fourth quarter of 2022, and an increase of $17.3 million, or 49.9%, from $34.7 million in the first quarter of 2022. The yield on interest earning assets (on a fully tax-equivalent basis) was 4.91% in the first quarter of 2023, compared to 4.67% in the fourth quarter of 2022, and 4.13% in the first quarter of 2022. The linked-quarter increase in the yield on interest earning assets was primarily due to the increase in market interest rates resulting in new loan originations, loans repricing, and investment purchases to be 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 5.06% in the first quarter of 2023, which was 20 basis points higher than 4.86% in the fourth quarter of 2022, and 66 basis points higher than 4.40% in the first quarter of 2022. While loan fees have historically maintained a relatively stable contribution to the aggregate loan yield, the recent periods saw 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 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 Interest 4.95 % 4.74 % 4.42 % 4.17 % 4.15 % Fees 0.11 0.12 0.17 0.26 0.25 Yield on Loans, Excluding PPP Loans 5.06 % 4.86 % 4.59 % 4.43 % 4.40 % Interest expense was $23.4 million for the first quarter of 2023, an increase of $7.5 million, or 46.7%, from $16.0 million in the fourth quarter of 2022, and an increase of $18.9 million, or 418.9%, from $4.5 million in the first quarter of 2022. The cost of interest bearing liabilities increased 81 basis points on a linked-quarter basis from 2.22% in the fourth quarter of 2022 to 3.03% in the first quarter of 2023, 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. On a year-over-year basis, the cost of interest bearing liabilities increased 223 basis points from 0.80% in the first quarter of 2022 to 3.03% in the first quarter of 2023, primarily due to the rapid increase in market interest rates that occurred between the periods, which impacted all funding sources. Interest expense on deposits was $16.4 million for the first quarter of 2023, an increase of $5.6 million, or 51.9%, from $10.8 million in the fourth quarter of 2022, and an increase of $13.2 million, or 418.4%, from $3.2 million in the first quarter of 2022. The cost of total deposits increased 70 basis points on a linked-quarter basis from 1.31% in the fourth quarter of 2022, to 2.01% in the first quarter of 2023, primarily due to the rising interest rate environment and increased competition from other market alternatives. On a year-over-year basis, the cost of total deposits increased 158 basis points from 0.43% in the first quarter of 2022, to 2.01% in the first quarter of 2023, 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 March 31, 2023, December 31, 2022, and March 31, 2022 is as follows: For the Three Months Ended March 31, 2023 December 31, 2022 March 31, 2022 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 $ 63,253 $ 447 2.86 % $ 65,393 $ 366 2.22 % $ 80,497 $ 26 0.13 % Investment Securities: Taxable Investment Securities 574,242 5,958 4.21 540,601 5,268 3.87 373,021 2,255 2.45 Tax-Exempt Investment Securities (1) 29,803 330 4.49 67,867 728 4.26 71,591 779 4.41 Total Investment Securities 604,045 6,288 4.22 608,468 5,996 3.91 444,612 3,034 2.77 Paycheck Protection Program Loans (2) 999 2 1.00 1,109 48 17.06 18,140 563 12.58 Loans (1)(2) 3,629,447 45,263 5.06 3,481,041 42,654 4.86 2,881,845 31,275 4.40 Total Loans 3,630,446 45,265 5.06 3,482,150 42,702 4.87 2,899,985 31,838 4.45 Federal Home Loan Bank Stock 25,962 372 5.81 21,633 163 2.99 5,680 54 3.84 Total Interest Earning Assets 4,323,706 52,372 4.91 % 4,177,644 49,227 4.67 % 3,430,774 34,952 4.13 % Noninterest Earning Assets 81,528 73,701 83,024 Total Assets $ 4,405,234 $ 4,251,345 $ 3,513,798 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 461,372 $ 2,780 2.44 % $ 464,631 $ 2,013 1.72 % $ 566,279 $ 597 0.43 % Savings and Money Market Deposits 1,044,794 6,499 2.52 1,048,227 4,533 1.72 876,580 918 0.42 Time Deposits 248,174 1,069 1.75 281,334 1,007 1.42 288,914 745 1.05 Brokered Deposits 743,465 6,026 3.29 537,351 3,228 2.38 406,648 898 0.90 Total Interest Bearing Deposits 2,497,805 16,374 2.66 2,331,543 10,781 1.83 2,138,421 3,158 0.60 Federal Funds Purchased 415,111 4,944 4.83 340,471 3,379 3.94 10,600 9 0.35 Notes Payable 13,750 263 7.77 11,359 202 7.04 — — — FHLB Advances 128,222 861 2.72 94,103 575 2.42 42,500 150 1.43 Subordinated Debentures 78,945 983 5.05 81,242 1,030 5.03 92,286 1,197 5.26 Total Interest Bearing Liabilities 3,133,833 23,425 3.03 % 2,858,718 15,967 2.22 % 2,283,807 4,514 0.80 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 813,598 943,232 822,488 Other Noninterest Bearing Liabilities 54,270 61,806 24,479 Total Noninterest Bearing Liabilities 867,868 1,005,038 846,967 Shareholders' Equity 403,533 387,589 383,024 Total Liabilities and Shareholders' Equity $ 4,405,234 $ 4,251,345 $ 3,513,798 Net Interest Income / Interest Rate Spread 28,947 1.88 % 33,260 2.45 % 30,438 3.33 % Net Interest Margin (3) 2.72 % 3.16 % 3.60 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities and Loans (380 ) (367 ) (258 ) Net Interest Income $ 28,567 $ 32,893 $ 30,180 _____________________________________ (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 Credit Losses On January 1, 2023, the Company adopted Accounting Standards Update No. 2016-13 “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments,” more commonly referred to as “CECL.” Upon adoption of CECL, the Company’s allowance for credit losses on loans increased $650,000 and the allowance on unfunded commitments increased $4.9 million. The tax-effected impact of these two items totaled $3.9 million and was recorded as an adjustment to retained earnings as of January 1, 2023. The provision for credit losses was $1.5 million for both the first quarter of 2023 and the fourth quarter of 2022, compared to $1.7 million in the first quarter of 2022. The provision recorded in the first quarter of 2023 was primarily attributable to the more moderated growth of the loan portfolio. The allowance for credit losses to total loans was 1.36% at March 31, 2023, compared to 1.34% at December 31, 2022, and 1.40% at March 31, 2022. The following table presents the activity in the Company’s allowance for credit losses for the periods indicated: Three Months Ended March 31, December 31, March 31, (dollars in thousands) 2023 2022 2022 Balance at Beginning of Period $ 47,996 $ 46,491 $ 40,020 Impact of Adopting CECL 650 — — Provision for Credit Losses 1,500 1,500 1,675 Charge-offs (4 ) (3 ) (15 ) Recoveries 6 8 12 Balance at End of Period $ 50,148 $ 47,996 $ 41,692 The provision for unfunded commitments was a negative provision of ($875,000) for the first quarter of 2023 and zero for both the fourth quarter of 2022 and first quarter of 2022. The negative provision during the quarter was due to a reduction in outstanding unfunded commitments primarily attributable to the migration to funded loans. Noninterest Income Noninterest income was $1.9 million for the first quarter of 2023, an increase of $205,000 from $1.74 million for the fourth quarter of 2022, and an increase of $386,000 from $1.6 million for the first quarter of 2022. The linked-quarter increase was primarily due to an increase in letter of credit fees and FHLB prepayment income, offset partially by a decrease in other income. The year-over-year increase was primarily due to increased letter of credit fees and FHLB prepayment income, offset partially by no recorded swap fees. The following table presents the major components of noninterest income for the periods indicated: Three Months Ended March 31, December 31, March 31, (dollars in thousands) 2023 2022 2022 Noninterest Income: Customer Service Fees $ 349 $ 344 $ 281 Net Gain (Loss) on Sales of Securities (56 ) 30 — Letter of Credit Fees 634 358 242 Debit Card Interchange Fees 138 148 133 Swap Fees — — 557 Bank-Owned Life Insurance 234 238 148 FHLB Prepayment Income 299 — — Other Income 345 620 196 Totals $ 1,943 $ 1,738 $ 1,557 Noninterest Expense Noninterest expense was $14.2 million for the first quarter of 2023, a decrease of $1.0 million from $15.2 million for the fourth quarter of 2022, and an increase of $675,000 from $13.5 million for the first quarter of 2022. The linked-quarter decrease was primarily due to decreases in salaries and employee benefits resulting from lower discretionary incentive accruals. The year-over-year increase was primarily attributable to increases in the FDIC insurance assessment and derivative collateral fees, offset partially by declines in marketing and advertising and other expense. The following table presents the major components of noninterest expense for the periods indicated: Three Months Ended March 31, December 31, March 31, (dollars in thousands) 2023 2023 2022 Noninterest Expense: Salaries and Employee Benefits $ 8,815 $ 9,821 $ 8,694 Occupancy and Equipment 1,209 1,177 1,085 FDIC Insurance Assessment 665 360 360 Data Processing 357 371 297 Professional and Consulting Fees 755 635 696 Derivative Collateral Fees 380 535 2 Information Technology and Telecommunications 683 673 578 Marketing and Advertising 262 403 626 Intangible Asset Amortization 48 48 48 Amortization of Tax Credit Investments 114 114 117 Other Expense 895 1,066 1,005 Totals $ 14,183 $ 15,203 $ 13,508 The Company had 246 full-time equivalent employees at both March 31, 2023 and December 31, 2022, and 229 employees at March 31, 2022. The efficiency ratio, a non-GAAP financial measure, was 46.2% for the first quarter of 2023, compared to 43.8% for the fourth quarter of 2022, and 42.4% for the first quarter of 2022. Income Taxes The effective combined federal and state income tax rate for the first quarter of 2023 was 25.9%, an increase from 23.4% for the fourth quarter of 2022 and consistent with 25.9% for the first quarter of 2022. Balance Sheet Total assets at March 31, 2023 were $4.60 billion, a 5.9% increase from $4.35 billion at December 31, 2022, and a 27.6% increase from $3.61 billion at March 31, 2022. The linked-quarter increase in total assets was primarily due to continued loan growth and an increase in cash and cash equivalent balances. The year-over-year increase in total assets was primarily due to strong loan growth, purchases of investment securities and an increase in cash and cash equivalent balances. Total gross loans at March 31, 2023 were $3.68 billion, an increase of $114.9 million, or 3.2%, over total gross loans of $3.57 billion at December 31, 2022, and an increase of $696.4 million, or 23.3%, over total gross loans of $2.99 billion at March 31, 2022. The increase in the loan portfolio during the first quarter of 2023 was primarily due to growth across all segments. The following table presents the dollar composition of the Company’s loan portfolio, by category, at the dates indicated: March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 (dollars in thousands) Commercial $ 454,193 $ 435,344 $ 412,448 $ 403,569 $ 363,290 Paycheck Protection Program 963 1,049 1,192 4,860 12,309 Construction and Land Development 312,277 295,554 280,380 305,552 272,333 1-4 Family Construction 85,797 70,242 55,177 53,639 48,798 Real Estate Mortgage: 1 - 4 Family Mortgage 380,210 355,474 341,102 334,815 312,201 Multifamily 1,320,081 1,306,738 1,230,509 1,087,865 1,012,623 CRE Owner Occupied 158,650 149,905 151,088 142,214 117,969 CRE Nonowner Occupied 962,671 947,008 900,691 886,432 840,463 Total Real Estate Mortgage Loans 2,821,612 2,759,125 2,623,390 2,451,326 2,283,256 Consumer and Other 9,518 8,132 7,495 6,939 7,981 Total Loans, Gross 3,684,360 3,569,446 3,380,082 3,225,885 2,987,967 Allowance for Loan Losses (50,148 ) (47,996 ) (46,491 ) (44,711 ) (41,692 ) Net Deferred Loan Fees (8,735 ) (9,293 ) (9,088 ) (9,536 ) (9,065 ) Total Loans, Net $ 3,625,477 $ 3,512,157 $ 3,324,503 $ 3,171,638 $ 2,937,210 Total deposits at March 31, 2023 were $3.41 billion, a decrease of $5.4 million, or 0.2%, over total deposits of $3.42 billion at December 31, 2022, and an increase of $375.5 million, or 12.4%, over total deposits of $3.04 billion at March 31, 2022. Deposits decreased slightly in the first quarter of 2023 primarily due to a decrease in noninterest bearing deposits and savings and money market deposits, offset by an increase in interest bearing deposits and brokered deposits. Brokered deposits were being used as a supplemental funding source, as needed, to support the loan portfolio growth. Uninsured deposits as of March 31, 2023 were 24% of total deposits, down from 38% as of December 31, 2022. The following table presents the dollar composition of the Company’s deposit portfolio, by category, at the dates indicated: March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 (dollars in thousands) Noninterest Bearing Transaction Deposits $ 742,198 $ 884,272 $ 961,084 $ 961,998 $ 835,482 Interest Bearing Transaction Deposits 630,037 451,992 510,396 522,151 598,402 Savings and Money Market Deposits 913,013 1,031,873 1,077,333 952,138 890,926 Time Deposits 266,213 272,253 293,052 272,424 286,674 Brokered Deposits 859,662 776,153 463,209 493,242 424,127 Total Deposits $ 3,411,123 $ 3,416,543 $ 3,305,074 $ 3,201,953 $ 3,035,611 Capital Total shareholders’ equity at March 31, 2023 was $402.0 million, an increase of $7.9 million, or 2.0%, compared to total shareholders’ equity of $394.1 million at December 31, 2022, and an increase of $22.6 million, or 5.9%, over total shareholders’ equity of $379.4 million at March 31, 2022. The linked-quarter increase was due to net income retained, offset partially by the adoption of CECL and preferred stock dividends. The year-over-year increase was due to net income retained and unrealized gains in the derivatives portfolio, offset partially by an increase in unrealized losses in the securities portfolio, stock repurchases, the adoption of CECL and preferred stock dividends. The Company did not purchase any shares of its common stock during the first quarter of 2023. Tangible book value per share, a non-GAAP financial measure, was $11.95 as of March 31, 2023, an increase of 2.2% from $11.69 as of December 31, 2022, and an increase of 8.5% from $11.01 as of March 31, 2022. The linked-quarter and year-over-year increases occurred despite the market value depreciation of the securities portfolio driven by the rapidly rising interest rate environment. Tangible common equity as a percentage of tangible assets, a non-GAAP financial measure, was 7.23% at March 31, 2023, compared to 7.48% at December 31, 2022, and 8.60% at March 31, 2022. 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 June 1, 2023 to shareholders of record of the Series A Preferred Stock at the close of business on May 15, 2023. Liquidity Total on- and off-balance sheet liquidity was $1.92 billion as of March 31, 2023, compared to $1.38 billion at December 31, 2022 and $1.44 billion at March 31, 2022. During the first quarter of 2023, the Company took a number of actions to increase its total liquidity by more than $500 million, including pledging loans and securities to create additional borrowing capacity at the Federal Reserve Bank and increasing its cash on the balance sheet. The Company did not utilize the Bank Term Funding Program (BTFP) or Federal Reserve Discount Window during the first quarter of 2023. Primary Liquidity—On-Balance Sheet March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 (dollars in thousands) Cash and Cash Equivalents $ 177,116 $ 48,090 $ 36,332 $ 43,168 $ 50,312 Securities Available for Sale 559,430 548,613 542,007 482,583 459,090 Less: Pledged Securities (234,452 ) — — — — Total Primary Liquidity $ 502,094 $ 596,703 $ 578,339 $ 525,751 $ 509,402 Ratio of Primary Liquidity to Total Deposits 14.7 % 17.5 % 17.5 % 16.4 % 16.8 % Secondary Liquidity—Off-Balance Sheet Borrowing Capacity Net Secured Borrowing Capacity with the FHLB $ 246,795 $ 390,898 $ 426,604 $ 569,076 $ 542,489 Net Secured Borrowing Capacity with the Federal Reserve Bank 990,685 157,827 156,534 169,766 159,328 Unsecured Borrowing Capacity with Correspondent Lenders 158,000 208,000 208,000 208,000 208,000 Secured Borrowing Capacity with Correspondent Lender 26,250 26,250 40,000 25,000 25,000 Total Secondary Liquidity 1,421,730 782,975 831,138 971,842 934,817 Total Primary and Secondary Liquidity $ 1,923,824 $ 1,379,678 $ 1,409,477 $ 1,497,593 $ 1,444,219 Ratio of Primary and Secondary Liquidity to Total Deposits 56.4 % 40.4 % 42.6 % 46.8 % 47.6 % Asset Quality Annualized net charge-offs (recoveries) as a percentage of average loans were 0.00% for the first quarter of 2023, fourth quarter of 2022 and first quarter of 2022. At March 31, 2023, the Company’s nonperforming assets, which include nonaccrual loans, loans past due 90 days and still accruing, and foreclosed assets, were $809,000, or 0.02% of total assets, as compared to $639,000, or 0.01% of total assets at December 31, 2022, and $706,000, or 0.02% of total assets at March 31, 2022. Loans that have potential weaknesses that warrant a watchlist risk rating at March 31, 2023 totaled $27.6 million, compared to $32.3 million at December 31, 2022, and $46.8 million at March 31, 2022. The increased uncertainty in the economic environment may result in future watchlist or adverse classifications in the loan portfolio. Loans that warranted a substandard risk rating at March 31, 2023 totaled $36.3 million, compared to $28.0 million at December 31, 2022, and $18.6 million at March 31, 2022. The linked-quarter increase was primarily due to the downgrade of one loan relationship. The following table presents a summary of asset quality measurements at the dates indicated: As of and for the Three Months Ended March 31, December 31, September 30, June 30, March 31, (dollars in thousands) 2023 2022 2022 2022 2022 Selected Asset Quality Data Loans 30-89 Days Past Due $ 21 $ 186 $ 38 $ 225 $ 13 Loans 30-89 Days Past Due to Total Loans 0.00 % 0.01 % 0.00 % 0.01 % 0.00 % Nonperforming Loans $ 693 $ 639 $ 663 $ 688 $ 706 Nonperforming Loans to Total Loans 0.02 % 0.02 % 0.02 % 0.02 % 0.02 % Foreclosed Assets $ 116 $ — $ — $ — $ — Nonaccrual Loans to Total Loans 0.02 % 0.02 % 0.02 % 0.02 % 0.02 % Nonaccrual Loans and Loans Past Due 90 Days and Still Accruing to Total Loans 0.02 0.02 0.02 0.02 0.02 Nonperforming Assets (1) $ 809 $ 639 $ 663 $ 688 $ 706 Nonperforming Assets to Total Assets (1) 0.02 % 0.01 % 0.02 % 0.02 % 0.02 % Allowance for Credit Losses to Total Loans 1.36 1.34 1.38 1.39 1.40 Allowance for Credit Losses to Nonaccrual Loans 7,236.36 7,511.11 7,012.22 6,498.69 5,905.38 Net Loan Charge-Offs (Recoveries) (Annualized) to Average Loans 0.00 0.00 (0.03 ) 0.00 0.00 _____________________________________ (1) Nonperforming assets are defined as nonaccrual loans plus loans 90 days past due and still accruing plus foreclosed assets. The Company will host a conference call to discuss its first quarter 2023 financial results on Thursday, April 27, 2023 at 8:00 a.m. Central Time. The conference call can be accessed by dialing 877-270-2148 and requesting to join the Bridgewater Bancshares earnings call. To listen to a replay of the conference call via phone, please dial 877-344-7529 and enter access code 7417750. The replay will be available through May 4, 2023. The conference call will also be available via a live webcast on the Investor Relations section of the Company’s website, investors.bridgewaterbankmn.com, and archived for replay. 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 $4.6 billion and seven branches as of March 31, 2023, 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, which has resulted in unrealized losses in our portfolio; business and economic conditions generally and in the financial services industry, nationally and within our market area, including rising rates of inflation; the effects of recent developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time at Silicon Valley Bank and Signature Bank that resulted in the failure of those institutions; 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 implementation of the Current Expected Credit Loss standard; the concentration of large loans to certain borrowers; the concentration of large deposits from certain clients, who have balances above current FDIC insurance limits and may withdraw deposits to diversify their exposure; our ability to successfully manage liquidity risk, which may increase our dependence on non-core funding sources such as brokered deposits, and negatively impact 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 expected discontinuation of 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 in response to the recent failures of Silicon Valley Bank and Signature Bank; risks related to climate change and the negative impact it may have on our customers and their businesses; 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 the Company 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. The Company undertakes 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) March 31, December 31, March 31, 2023 2022 2022 (Unaudited) (Unaudited) ASSETS Cash and Cash Equivalents $ 209,192 $ 87,043 $ 71,887 Bank-Owned Certificates of Deposit 1,225 1,181 1,139 Securities Available for Sale, at Fair Value 559,430 548,613 459,090 Loans, Net of Allowance for Credit Losses of $50,148 at March 31, 2023 (unaudited), $47,996 at December 31, 2022 and $41,692 at March 31, 2022 (unaudited) 3,625,477 3,512,157 2,937,210 Federal Home Loan Bank (FHLB) Stock, at Cost 28,632 19,606 6,846 Premises and Equipment, Net 47,801 48,445 49,044 Foreclosed Assets 116 — — Accrued Interest 13,377 13,479 9,596 Goodwill 2,626 2,626 2,626 Other Intangible Assets, Net 240 288 431 Bank-Owned Life Insurance 33,719 33,485 25,464 Other Assets 81,064 78,739 44,587 Total Assets $ 4,602,899 $ 4,345,662 $ 3,607,920 LIABILITIES AND EQUITY LIABILITIES Deposits: Noninterest Bearing $ 742,198 $ 884,272 $ 835,482 Interest Bearing 2,668,925 2,532,271 2,200,129 Total Deposits 3,411,123 3,416,543 3,035,611 Federal Funds Purchased 437,000 287,000 23,000 Notes Payable 13,750 13,750 — FHLB Advances 197,000 97,000 42,500 Subordinated Debentures, Net of Issuance Costs 79,001 78,905 92,349 Accrued Interest Payable 3,257 2,831 1,576 Other Liabilities 59,762 55,569 33,443 Total Liabilities 4,200,893 3,951,598 3,228,479 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 March 31, 2023 (unaudited), December 31, 2022, and March 31, 2022 (unaudited) 66,514 66,514 66,514 Common Stock- $0.01 par value; Authorized 75,000,000 Common Stock - Issued and Outstanding 27,845,244 at March 31, 2023 (unaudited), 27,751,950 at December 31, 2022 and 28,150,389 at March 31, 2022 (unaudited) 278 278 282 Additional Paid-In Capital 97,716 96,529 103,756 Retained Earnings 255,394 248,685 210,596 Accumulated Other Comprehensive Income (Loss) (17,896 ) (17,942 ) (1,707 ) Total Shareholders' Equity 402,006 394,064 379,441 Total Liabilities and Equity $ 4,602,899 $ 4,345,662 $ 3,607,920 Bridgewater Bancshares, Inc. and Subsidiaries Consolidated Statements of Income (dollars in thousands, except per share data) (Unaudited) Three Months Ended March 31, December 31, March 31, 2023 2022 2022 INTEREST INCOME Loans, Including Fees $ 44,955 $ 42,488 $ 31,744 Investment Securities 6,218 5,843 2,870 Other 819 529 80 Total Interest Income 51,992 48,860 34,694 INTEREST EXPENSE Deposits 16,374 10,781 3,158 Notes Payable 263 202 — FHLB Advances 861 575 150 Subordinated Debentures 983 1,030 1,197 Federal Funds Purchased 4,944 3,379 9 Total Interest Expense 23,425 15,967 4,514 NET INTEREST INCOME 28,567 32,893 30,180 Provision for Credit Losses 625 1,500 1,675 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 27,942 31,393 28,505 NONINTEREST INCOME Customer Service Fees 349 344 281 Net Gain (Loss) on Sales of Available for Sale Securities (56 ) 30 — Other Income 1,650 1,364 1,276 Total Noninterest Income 1,943 1,738 1,557 NONINTEREST EXPENSE Salaries and Employee Benefits 8,815 9,821 8,694 Occupancy and Equipment 1,209 1,177 1,085 Other Expense 4,159 4,205 3,729 Total Noninterest Expense 14,183 15,203 13,508 INCOME BEFORE INCOME TAXES 15,702 17,928 16,554 Provision for Income Taxes 4,060 4,193 4,292 NET INCOME 11,642 13,735 12,262 Preferred Stock Dividends (1,013 ) (1,014 ) (1,013 ) NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 10,629 $ 12,721 $ 11,249 EARNINGS PER SHARE Basic $ 0.38 $ 0.46 $ 0.40 Diluted 0.37 0.45 0.39 Bridgewater Bancshares, Inc. and Subsidiaries Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended March 31, December 31, March 31, 2023 2022 2022 Pre-Provision Net Revenue Noninterest Income $ 1,943 $ 1,738 $ 1,557 Less: (Gain) Loss on Sales of Securities 56 (30 ) — Less: FHLB Advance Prepayment Income (299 ) — — Total Operating Noninterest Income 1,700 1,708 1,557 Plus: Net Interest Income 28,567 32,893 30,180 Net Operating Revenue $ 30,267 $ 34,601 $ 31,737 Noninterest Expense $ 14,183 $ 15,203 $ 13,508 Less: Amortization of Tax Credit Investments (114 ) (114 ) (117 ) Total Operating Noninterest Expense $ 14,069 $ 15,089 $ 13,391 Pre-Provision Net Revenue $ 16,198 $ 19,512 $ 18,346 Plus: Non-Operating Revenue Adjustments 243 30 — Less: Provision for Credit Losses 625 1,500 1,675 Non-Operating Expense Adjustments 114 114 117 Provision for Income Taxes 4,060 4,193 4,292 Net Income $ 11,642 $ 13,735 $ 12,262 Average Assets $ 4,405,234 $ 4,251,345 $ 3,513,798 Pre-Provision Net Revenue Return on Average Assets 1.49 % 1.82 % 2.12 % As of and for the Three Months Ended March 31, December 31, March 31, 2023 2022 2022 Core Net Interest Margin Net Interest Income (Tax-Equivalent Basis) $ 28,947 $ 33,260 $ 30,438 Less: Loan Fees (998 ) (1,100 ) (1,743 ) Less: PPP Interest and Fees (2 ) (48 ) (563 ) Core Net Interest Income $ 27,947 $ 32,112 $ 28,132 Average Interest Earning Assets $ 4,323,706 $ 4,177,644 $ 3,430,774 Less: Average PPP Loans (999 ) (1,109 ) (18,140 ) Core Average Interest Earning Assets $ 4,322,707 $ 4,176,535 $ 3,412,634 Core Net Interest Margin 2.62 % 3.05 % 3.34 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended March 31, December 31, March 31, 2023 2022 2022 Efficiency Ratio Noninterest Expense $ 14,183 $ 15,203 $ 13,508 Less: Amortization of Intangible Assets (48 ) (48 ) (48 ) Adjusted Noninterest Expense $ 14,135 $ 15,155 $ 13,460 Net Interest Income 28,567 32,893 30,180 Noninterest Income 1,943 1,738 1,557 Less: (Gain) Loss on Sales of Securities 56 (30 ) — Adjusted Operating Revenue $ 30,566 $ 34,601 $ 31,737 Efficiency Ratio 46.2 % 43.8 % 42.4 % Adjusted Efficiency Ratio Noninterest Expense $ 14,183 $ 15,203 $ 13,508 Less: Amortization of Tax Credit Investments (114 ) (114 ) (117 ) Less: Amortization of Intangible Assets (48 ) (48 ) (48 ) Adjusted Noninterest Expense $ 14,021 $ 15,041 $ 13,343 Net Interest Income 28,567 32,893 30,180 Noninterest Income 1,943 1,738 1,557 Less: FHLB Advance Prepayment Income (299 ) — — Less: (Gain) Loss on Sales of Securities 56 (30 ) — Adjusted Operating Revenue $ 30,267 $ 34,601 $ 31,737 Adjusted Efficiency Ratio 46.3 % 43.5 % 42.0 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) As of and for the Three Months Ended March 31, December 31, March 31, 2023 2022 2022 Tangible Common Equity and Tangible Common Equity/Tangible Assets Total Shareholders' Equity $ 402,006 $ 394,064 $ 379,441 Less: Preferred Stock (66,514 ) (66,514 ) (66,514 ) Total Common Shareholders' Equity 335,492 327,550 312,927 Less: Intangible Assets (2,866 ) (2,914 ) (3,057 ) Tangible Common Equity $ 332,626 $ 324,636 $ 309,870 Total Assets $ 4,602,899 $ 4,345,662 $ 3,607,920 Less: Intangible Assets (2,866 ) (2,914 ) (3,057 ) Tangible Assets $ 4,600,033 $ 4,342,748 $ 3,604,863 Tangible Common Equity/Tangible Assets 7.23 % 7.48 % 8.60 % Tangible Book Value Per Share Book Value Per Common Share $ 12.05 $ 11.80 $ 11.12 Less: Effects of Intangible Assets (0.10 ) (0.11 ) (0.11 ) Tangible Book Value Per Common Share $ 11.95 $ 11.69 $ 11.01 Return on Average Tangible Common Equity Net Income Available to Common Shareholders $ 10,629 $ 12,721 $ 11,249 Average Shareholders' Equity $ 403,533 $ 387,589 $ 383,024 Less: Average Preferred Stock (66,514 ) (66,514 ) (66,514 ) Average Common Equity 337,019 321,075 316,510 Less: Effects of Average Intangible Assets (2,894 ) (2,941 ) (3,084 ) Average Tangible Common Equity $ 334,125 $ 318,134 $ 313,426 Return on Average Tangible Common Equity 12.90 % 15.86 % 14.56 % Three Months Ended March 31, December 31, September 30, June 30, March 31, 2023 2022 2022 2022 2022 Tangible Common Equity Total Shareholders' Equity $ 402,006 $ 394,064 $ 382,007 $ 374,883 $ 379,441 Less: Preferred Stock (66,514 ) (66,514 ) (66,514 ) (66,514 ) (66,514 ) Common Shareholders' Equity 335,492 327,550 315,493 308,369 312,927 Less: Intangible Assets (2,866 ) (2,914 ) (2,962 ) (3,009 ) (3,057 ) Tangible Common Equity $ 332,626 $ 324,636 $ 312,531 $ 305,360 $ 309,870 View source version on businesswire.com: https://www.businesswire.com/news/home/20230425006170/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 First Quarter 2023 Net Income of $11.6 Million, $0.37 Diluted Earnings Per Common Share By: Bridgewater Bancshares, Inc. via Business Wire April 26, 2023 at 16:15 PM EDT Bridgewater Bancshares, Inc. (Nasdaq: BWB) (the Company), the parent company of Bridgewater Bank (the Bank), today announced net income of $11.6 million for the first quarter of 2023, compared to $13.7 million for the fourth quarter of 2022, and $12.3 million for the first quarter of 2022. Earnings per diluted common share for the first quarter of 2023 were $0.37, compared to $0.45 per diluted common share for the fourth quarter of 2022, and $0.39 per diluted common share for the same period in 2022. “While first quarter results included well-controlled expenses, superb asset quality, moderated loan growth, and expected net interest margin pressure, our focus was on supporting our clients and demonstrating the resiliency of our balance sheet and business model,” said Chairman, Chief Executive Officer, and President, Jerry Baack. “Bridgewater is a relationship-focused bank supporting a local real estate and small business client base. With a strong balance sheet, including a diversified loan portfolio, high level of insured deposits, and ample liquidity and borrowing capacity, we feel well-positioned to continue executing on our proven and successful business model.” First Quarter 2023 Financial Results Diluted Nonperforming ROA PPNR ROA (1) ROE earnings per share Efficiency ratio (1) assets to total assets 1.07 % 1.49 % 11.70 % $ 0.37 46.2 % 0.02 % _____________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. First Quarter 2023 Highlights Annualized return on average assets (ROA) and annualized return on average shareholders’ equity (ROE) for the first quarter of 2023 were 1.07% and 11.70%, compared to ROA and ROE of 1.28% and 14.06%, respectively, for the fourth quarter of 2022. Annualized return on average tangible common equity, a non-GAAP financial measure, was 12.90% for the first quarter of 2023, compared to 15.86% for the fourth quarter of 2022. Gross loans increased $114.9 million, or 13.1% annualized, from the fourth quarter of 2022. Deposits decreased slightly by $5.4 million, or 0.6% annualized, from the fourth quarter of 2022. Net interest margin (on a fully tax-equivalent basis) was 2.72%, compared to 3.16% in the fourth quarter of 2022. Efficiency ratio, a non-GAAP financial measure, was 46.2%, compared to 43.8% for the fourth quarter of 2022. Noninterest expense declined $1.0 million, or 6.7%, from the fourth quarter of 2022. Annualized noninterest expense to average assets was 1.31%, compared to 1.42% for the fourth quarter of 2022. A credit loss provision of $1.5 million was recorded to support continued loan growth in the first quarter of 2023. The allowance for credit losses to total loans was 1.36% at March 31, 2023, compared to 1.34% at December 31, 2022. Annualized net loan charge-offs (recoveries) as a percentage of average loans were 0.00% for the first quarter of 2023 and for the fourth quarter of 2022. Tangible book value per share, a non-GAAP financial measure, increased $0.26, or 8.9% annualized, to $11.95 at March 31, 2023 compared to $11.69 at December 31, 2022. Key Financial Measures As of and for the Three Months Ended March 31, December 31, March 31, 2023 2022 2022 Per Common Share Data Basic Earnings Per Share $ 0.38 $ 0.46 $ 0.40 Diluted Earnings Per Share 0.37 0.45 0.39 Book Value Per Share 12.05 11.80 11.12 Tangible Book Value Per Share (1) 11.95 11.69 11.01 Basic Weighted Average Shares Outstanding 27,726,894 27,558,983 28,123,809 Diluted Weighted Average Shares Outstanding 28,490,046 28,527,306 29,156,085 Shares Outstanding at Period End 27,845,244 27,751,950 28,150,389 Selected Performance Ratios Return on Average Assets (Annualized) 1.07 % 1.28 % 1.42 % Pre-Provision Net Revenue Return on Average Assets (Annualized) (1) 1.49 1.82 2.12 Return on Average Shareholders' Equity (Annualized) 11.70 14.06 12.98 Return on Average Tangible Common Equity (Annualized) (1) 12.90 15.86 14.56 Yield on Interest Earning Assets (2) 4.91 4.67 4.13 Yield on Total Loans, Gross (2) 5.06 4.87 4.45 Cost of Total Deposits 2.01 1.31 0.43 Cost of Funds 2.41 1.67 0.59 Net Interest Margin (2) 2.72 3.16 3.60 Core Net Interest Margin (1)(2) 2.62 3.05 3.34 Efficiency Ratio (1) 46.2 43.8 42.4 Noninterest Expense to Average Assets (Annualized) 1.31 1.42 1.56 Loan to Deposit Ratio 108.0 104.5 98.4 Core Deposits to Total Deposits (3) 72.4 74.6 84.3 Tangible Common Equity to Tangible Assets (1) 7.23 7.48 8.60 Capital Ratios (Bank Only) (4) Tier 1 Leverage Ratio 10.61 % 10.76 % 11.13 % Common Equity Tier 1 Risk-based Capital Ratio 11.37 11.29 11.42 Tier 1 Risk-based Capital Ratio 11.37 11.29 11.42 Total Risk-based Capital Ratio 12.62 12.47 12.65 Capital Ratios (Consolidated) (4) Tier 1 Leverage Ratio 9.41 % 9.55 % 10.78 % Common Equity Tier 1 Risk-based Capital Ratio 8.48 8.40 9.13 Tier 1 Risk-based Capital Ratio 10.08 10.03 11.08 Total Risk-based Capital Ratio 13.25 13.15 15.02 _____________________________________ (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 March 31, December31, September 30, June 30, March 31, (dollars in thousands) 2023 2022 2022 2022 2022 Selected Balance Sheet Data Total Assets $ 4,602,899 $ 4,345,662 $ 4,128,987 $ 3,883,264 $ 3,607,920 Total Loans, Gross 3,684,360 3,569,446 3,380,082 3,225,885 2,987,967 Allowance for Credit Losses 50,148 47,996 46,491 44,711 41,692 Goodwill and Other Intangibles 2,866 2,914 2,962 3,009 3,057 Deposits 3,411,123 3,416,543 3,305,074 3,201,953 3,035,611 Tangible Common Equity (1) 332,626 324,636 312,531 305,360 309,870 Total Shareholders' Equity 402,006 394,064 382,007 374,883 379,441 Average Total Assets - Quarter-to-Date 4,405,234 4,251,345 3,948,201 3,743,575 3,513,798 Average Shareholders' Equity - Quarter-to-Date 403,533 387,589 384,020 381,448 383,024 _____________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. For the Three Months Ended March 31, December 31, March 31, (dollars in thousands) 2023 2022 2022 Selected Income Statement Data Interest Income $ 51,992 $ 48,860 $ 34,694 Interest Expense 23,425 15,967 4,514 Net Interest Income 28,567 32,893 30,180 Provision for Credit Losses 625 1,500 1,675 Net Interest Income after Provision for Credit Losses 27,942 31,393 28,505 Noninterest Income 1,943 1,738 1,557 Noninterest Expense 14,183 15,203 13,508 Income Before Income Taxes 15,702 17,928 16,554 Provision for Income Taxes 4,060 4,193 4,292 Net Income 11,642 13,735 12,262 Preferred Stock Dividends (1,013 ) (1,014 ) (1,013 ) Net Income Available to Common Shareholders $ 10,629 $ 12,721 $ 11,249 Income Statement Net Interest Income Net interest income was $28.6 million for the first quarter of 2023, a decrease of $4.3 million, or 13.2%, from $32.9 million in the fourth quarter of 2022, and a decrease of $1.6 million, or 5.3%, from $30.2 million in the first quarter of 2022. The linked-quarter and year-over-year decrease in net interest income was primarily due to higher rates paid on deposits and increased borrowings in the rising interest rate environment. Average interest earning assets were $4.32 billion for the first quarter of 2023, an increase of $146.1 million, or 3.5%, from $4.18 billion for the fourth quarter of 2022, and an increase of $892.9 million, or 26.0%, from $3.43 billion for the first quarter of 2022. The linked-quarter increase in average interest earning assets was primarily due to continued growth in the loan portfolio. The year-over-year increase in average interest earning assets was primarily due to strong growth in the loan portfolio and 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 first quarter of 2023 was 2.72%, a 44 basis point decrease from 3.16% in the fourth quarter of 2022, and an 88 basis point decrease from 3.60% in the first 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, for the first quarter of 2023 was 2.62%, a 43 basis point decrease from 3.05% in the fourth quarter of 2022, and a 72 basis point decrease from 3.34% in the first quarter of 2022. The decline in the margin when compared to both prior periods was primarily due to higher funding costs and increased borrowings in the rising interest rate environment, offset partially by higher earning asset yields. Interest income was $52.0 million for the first quarter of 2023, an increase of $3.1 million, or 6.4%, from $48.9 million in the fourth quarter of 2022, and an increase of $17.3 million, or 49.9%, from $34.7 million in the first quarter of 2022. The yield on interest earning assets (on a fully tax-equivalent basis) was 4.91% in the first quarter of 2023, compared to 4.67% in the fourth quarter of 2022, and 4.13% in the first quarter of 2022. The linked-quarter increase in the yield on interest earning assets was primarily due to the increase in market interest rates resulting in new loan originations, loans repricing, and investment purchases to be 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 5.06% in the first quarter of 2023, which was 20 basis points higher than 4.86% in the fourth quarter of 2022, and 66 basis points higher than 4.40% in the first quarter of 2022. While loan fees have historically maintained a relatively stable contribution to the aggregate loan yield, the recent periods saw 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 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 Interest 4.95 % 4.74 % 4.42 % 4.17 % 4.15 % Fees 0.11 0.12 0.17 0.26 0.25 Yield on Loans, Excluding PPP Loans 5.06 % 4.86 % 4.59 % 4.43 % 4.40 % Interest expense was $23.4 million for the first quarter of 2023, an increase of $7.5 million, or 46.7%, from $16.0 million in the fourth quarter of 2022, and an increase of $18.9 million, or 418.9%, from $4.5 million in the first quarter of 2022. The cost of interest bearing liabilities increased 81 basis points on a linked-quarter basis from 2.22% in the fourth quarter of 2022 to 3.03% in the first quarter of 2023, 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. On a year-over-year basis, the cost of interest bearing liabilities increased 223 basis points from 0.80% in the first quarter of 2022 to 3.03% in the first quarter of 2023, primarily due to the rapid increase in market interest rates that occurred between the periods, which impacted all funding sources. Interest expense on deposits was $16.4 million for the first quarter of 2023, an increase of $5.6 million, or 51.9%, from $10.8 million in the fourth quarter of 2022, and an increase of $13.2 million, or 418.4%, from $3.2 million in the first quarter of 2022. The cost of total deposits increased 70 basis points on a linked-quarter basis from 1.31% in the fourth quarter of 2022, to 2.01% in the first quarter of 2023, primarily due to the rising interest rate environment and increased competition from other market alternatives. On a year-over-year basis, the cost of total deposits increased 158 basis points from 0.43% in the first quarter of 2022, to 2.01% in the first quarter of 2023, 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 March 31, 2023, December 31, 2022, and March 31, 2022 is as follows: For the Three Months Ended March 31, 2023 December 31, 2022 March 31, 2022 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 $ 63,253 $ 447 2.86 % $ 65,393 $ 366 2.22 % $ 80,497 $ 26 0.13 % Investment Securities: Taxable Investment Securities 574,242 5,958 4.21 540,601 5,268 3.87 373,021 2,255 2.45 Tax-Exempt Investment Securities (1) 29,803 330 4.49 67,867 728 4.26 71,591 779 4.41 Total Investment Securities 604,045 6,288 4.22 608,468 5,996 3.91 444,612 3,034 2.77 Paycheck Protection Program Loans (2) 999 2 1.00 1,109 48 17.06 18,140 563 12.58 Loans (1)(2) 3,629,447 45,263 5.06 3,481,041 42,654 4.86 2,881,845 31,275 4.40 Total Loans 3,630,446 45,265 5.06 3,482,150 42,702 4.87 2,899,985 31,838 4.45 Federal Home Loan Bank Stock 25,962 372 5.81 21,633 163 2.99 5,680 54 3.84 Total Interest Earning Assets 4,323,706 52,372 4.91 % 4,177,644 49,227 4.67 % 3,430,774 34,952 4.13 % Noninterest Earning Assets 81,528 73,701 83,024 Total Assets $ 4,405,234 $ 4,251,345 $ 3,513,798 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 461,372 $ 2,780 2.44 % $ 464,631 $ 2,013 1.72 % $ 566,279 $ 597 0.43 % Savings and Money Market Deposits 1,044,794 6,499 2.52 1,048,227 4,533 1.72 876,580 918 0.42 Time Deposits 248,174 1,069 1.75 281,334 1,007 1.42 288,914 745 1.05 Brokered Deposits 743,465 6,026 3.29 537,351 3,228 2.38 406,648 898 0.90 Total Interest Bearing Deposits 2,497,805 16,374 2.66 2,331,543 10,781 1.83 2,138,421 3,158 0.60 Federal Funds Purchased 415,111 4,944 4.83 340,471 3,379 3.94 10,600 9 0.35 Notes Payable 13,750 263 7.77 11,359 202 7.04 — — — FHLB Advances 128,222 861 2.72 94,103 575 2.42 42,500 150 1.43 Subordinated Debentures 78,945 983 5.05 81,242 1,030 5.03 92,286 1,197 5.26 Total Interest Bearing Liabilities 3,133,833 23,425 3.03 % 2,858,718 15,967 2.22 % 2,283,807 4,514 0.80 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 813,598 943,232 822,488 Other Noninterest Bearing Liabilities 54,270 61,806 24,479 Total Noninterest Bearing Liabilities 867,868 1,005,038 846,967 Shareholders' Equity 403,533 387,589 383,024 Total Liabilities and Shareholders' Equity $ 4,405,234 $ 4,251,345 $ 3,513,798 Net Interest Income / Interest Rate Spread 28,947 1.88 % 33,260 2.45 % 30,438 3.33 % Net Interest Margin (3) 2.72 % 3.16 % 3.60 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities and Loans (380 ) (367 ) (258 ) Net Interest Income $ 28,567 $ 32,893 $ 30,180 _____________________________________ (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 Credit Losses On January 1, 2023, the Company adopted Accounting Standards Update No. 2016-13 “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments,” more commonly referred to as “CECL.” Upon adoption of CECL, the Company’s allowance for credit losses on loans increased $650,000 and the allowance on unfunded commitments increased $4.9 million. The tax-effected impact of these two items totaled $3.9 million and was recorded as an adjustment to retained earnings as of January 1, 2023. The provision for credit losses was $1.5 million for both the first quarter of 2023 and the fourth quarter of 2022, compared to $1.7 million in the first quarter of 2022. The provision recorded in the first quarter of 2023 was primarily attributable to the more moderated growth of the loan portfolio. The allowance for credit losses to total loans was 1.36% at March 31, 2023, compared to 1.34% at December 31, 2022, and 1.40% at March 31, 2022. The following table presents the activity in the Company’s allowance for credit losses for the periods indicated: Three Months Ended March 31, December 31, March 31, (dollars in thousands) 2023 2022 2022 Balance at Beginning of Period $ 47,996 $ 46,491 $ 40,020 Impact of Adopting CECL 650 — — Provision for Credit Losses 1,500 1,500 1,675 Charge-offs (4 ) (3 ) (15 ) Recoveries 6 8 12 Balance at End of Period $ 50,148 $ 47,996 $ 41,692 The provision for unfunded commitments was a negative provision of ($875,000) for the first quarter of 2023 and zero for both the fourth quarter of 2022 and first quarter of 2022. The negative provision during the quarter was due to a reduction in outstanding unfunded commitments primarily attributable to the migration to funded loans. Noninterest Income Noninterest income was $1.9 million for the first quarter of 2023, an increase of $205,000 from $1.74 million for the fourth quarter of 2022, and an increase of $386,000 from $1.6 million for the first quarter of 2022. The linked-quarter increase was primarily due to an increase in letter of credit fees and FHLB prepayment income, offset partially by a decrease in other income. The year-over-year increase was primarily due to increased letter of credit fees and FHLB prepayment income, offset partially by no recorded swap fees. The following table presents the major components of noninterest income for the periods indicated: Three Months Ended March 31, December 31, March 31, (dollars in thousands) 2023 2022 2022 Noninterest Income: Customer Service Fees $ 349 $ 344 $ 281 Net Gain (Loss) on Sales of Securities (56 ) 30 — Letter of Credit Fees 634 358 242 Debit Card Interchange Fees 138 148 133 Swap Fees — — 557 Bank-Owned Life Insurance 234 238 148 FHLB Prepayment Income 299 — — Other Income 345 620 196 Totals $ 1,943 $ 1,738 $ 1,557 Noninterest Expense Noninterest expense was $14.2 million for the first quarter of 2023, a decrease of $1.0 million from $15.2 million for the fourth quarter of 2022, and an increase of $675,000 from $13.5 million for the first quarter of 2022. The linked-quarter decrease was primarily due to decreases in salaries and employee benefits resulting from lower discretionary incentive accruals. The year-over-year increase was primarily attributable to increases in the FDIC insurance assessment and derivative collateral fees, offset partially by declines in marketing and advertising and other expense. The following table presents the major components of noninterest expense for the periods indicated: Three Months Ended March 31, December 31, March 31, (dollars in thousands) 2023 2023 2022 Noninterest Expense: Salaries and Employee Benefits $ 8,815 $ 9,821 $ 8,694 Occupancy and Equipment 1,209 1,177 1,085 FDIC Insurance Assessment 665 360 360 Data Processing 357 371 297 Professional and Consulting Fees 755 635 696 Derivative Collateral Fees 380 535 2 Information Technology and Telecommunications 683 673 578 Marketing and Advertising 262 403 626 Intangible Asset Amortization 48 48 48 Amortization of Tax Credit Investments 114 114 117 Other Expense 895 1,066 1,005 Totals $ 14,183 $ 15,203 $ 13,508 The Company had 246 full-time equivalent employees at both March 31, 2023 and December 31, 2022, and 229 employees at March 31, 2022. The efficiency ratio, a non-GAAP financial measure, was 46.2% for the first quarter of 2023, compared to 43.8% for the fourth quarter of 2022, and 42.4% for the first quarter of 2022. Income Taxes The effective combined federal and state income tax rate for the first quarter of 2023 was 25.9%, an increase from 23.4% for the fourth quarter of 2022 and consistent with 25.9% for the first quarter of 2022. Balance Sheet Total assets at March 31, 2023 were $4.60 billion, a 5.9% increase from $4.35 billion at December 31, 2022, and a 27.6% increase from $3.61 billion at March 31, 2022. The linked-quarter increase in total assets was primarily due to continued loan growth and an increase in cash and cash equivalent balances. The year-over-year increase in total assets was primarily due to strong loan growth, purchases of investment securities and an increase in cash and cash equivalent balances. Total gross loans at March 31, 2023 were $3.68 billion, an increase of $114.9 million, or 3.2%, over total gross loans of $3.57 billion at December 31, 2022, and an increase of $696.4 million, or 23.3%, over total gross loans of $2.99 billion at March 31, 2022. The increase in the loan portfolio during the first quarter of 2023 was primarily due to growth across all segments. The following table presents the dollar composition of the Company’s loan portfolio, by category, at the dates indicated: March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 (dollars in thousands) Commercial $ 454,193 $ 435,344 $ 412,448 $ 403,569 $ 363,290 Paycheck Protection Program 963 1,049 1,192 4,860 12,309 Construction and Land Development 312,277 295,554 280,380 305,552 272,333 1-4 Family Construction 85,797 70,242 55,177 53,639 48,798 Real Estate Mortgage: 1 - 4 Family Mortgage 380,210 355,474 341,102 334,815 312,201 Multifamily 1,320,081 1,306,738 1,230,509 1,087,865 1,012,623 CRE Owner Occupied 158,650 149,905 151,088 142,214 117,969 CRE Nonowner Occupied 962,671 947,008 900,691 886,432 840,463 Total Real Estate Mortgage Loans 2,821,612 2,759,125 2,623,390 2,451,326 2,283,256 Consumer and Other 9,518 8,132 7,495 6,939 7,981 Total Loans, Gross 3,684,360 3,569,446 3,380,082 3,225,885 2,987,967 Allowance for Loan Losses (50,148 ) (47,996 ) (46,491 ) (44,711 ) (41,692 ) Net Deferred Loan Fees (8,735 ) (9,293 ) (9,088 ) (9,536 ) (9,065 ) Total Loans, Net $ 3,625,477 $ 3,512,157 $ 3,324,503 $ 3,171,638 $ 2,937,210 Total deposits at March 31, 2023 were $3.41 billion, a decrease of $5.4 million, or 0.2%, over total deposits of $3.42 billion at December 31, 2022, and an increase of $375.5 million, or 12.4%, over total deposits of $3.04 billion at March 31, 2022. Deposits decreased slightly in the first quarter of 2023 primarily due to a decrease in noninterest bearing deposits and savings and money market deposits, offset by an increase in interest bearing deposits and brokered deposits. Brokered deposits were being used as a supplemental funding source, as needed, to support the loan portfolio growth. Uninsured deposits as of March 31, 2023 were 24% of total deposits, down from 38% as of December 31, 2022. The following table presents the dollar composition of the Company’s deposit portfolio, by category, at the dates indicated: March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 (dollars in thousands) Noninterest Bearing Transaction Deposits $ 742,198 $ 884,272 $ 961,084 $ 961,998 $ 835,482 Interest Bearing Transaction Deposits 630,037 451,992 510,396 522,151 598,402 Savings and Money Market Deposits 913,013 1,031,873 1,077,333 952,138 890,926 Time Deposits 266,213 272,253 293,052 272,424 286,674 Brokered Deposits 859,662 776,153 463,209 493,242 424,127 Total Deposits $ 3,411,123 $ 3,416,543 $ 3,305,074 $ 3,201,953 $ 3,035,611 Capital Total shareholders’ equity at March 31, 2023 was $402.0 million, an increase of $7.9 million, or 2.0%, compared to total shareholders’ equity of $394.1 million at December 31, 2022, and an increase of $22.6 million, or 5.9%, over total shareholders’ equity of $379.4 million at March 31, 2022. The linked-quarter increase was due to net income retained, offset partially by the adoption of CECL and preferred stock dividends. The year-over-year increase was due to net income retained and unrealized gains in the derivatives portfolio, offset partially by an increase in unrealized losses in the securities portfolio, stock repurchases, the adoption of CECL and preferred stock dividends. The Company did not purchase any shares of its common stock during the first quarter of 2023. Tangible book value per share, a non-GAAP financial measure, was $11.95 as of March 31, 2023, an increase of 2.2% from $11.69 as of December 31, 2022, and an increase of 8.5% from $11.01 as of March 31, 2022. The linked-quarter and year-over-year increases occurred despite the market value depreciation of the securities portfolio driven by the rapidly rising interest rate environment. Tangible common equity as a percentage of tangible assets, a non-GAAP financial measure, was 7.23% at March 31, 2023, compared to 7.48% at December 31, 2022, and 8.60% at March 31, 2022. 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 June 1, 2023 to shareholders of record of the Series A Preferred Stock at the close of business on May 15, 2023. Liquidity Total on- and off-balance sheet liquidity was $1.92 billion as of March 31, 2023, compared to $1.38 billion at December 31, 2022 and $1.44 billion at March 31, 2022. During the first quarter of 2023, the Company took a number of actions to increase its total liquidity by more than $500 million, including pledging loans and securities to create additional borrowing capacity at the Federal Reserve Bank and increasing its cash on the balance sheet. The Company did not utilize the Bank Term Funding Program (BTFP) or Federal Reserve Discount Window during the first quarter of 2023. Primary Liquidity—On-Balance Sheet March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 (dollars in thousands) Cash and Cash Equivalents $ 177,116 $ 48,090 $ 36,332 $ 43,168 $ 50,312 Securities Available for Sale 559,430 548,613 542,007 482,583 459,090 Less: Pledged Securities (234,452 ) — — — — Total Primary Liquidity $ 502,094 $ 596,703 $ 578,339 $ 525,751 $ 509,402 Ratio of Primary Liquidity to Total Deposits 14.7 % 17.5 % 17.5 % 16.4 % 16.8 % Secondary Liquidity—Off-Balance Sheet Borrowing Capacity Net Secured Borrowing Capacity with the FHLB $ 246,795 $ 390,898 $ 426,604 $ 569,076 $ 542,489 Net Secured Borrowing Capacity with the Federal Reserve Bank 990,685 157,827 156,534 169,766 159,328 Unsecured Borrowing Capacity with Correspondent Lenders 158,000 208,000 208,000 208,000 208,000 Secured Borrowing Capacity with Correspondent Lender 26,250 26,250 40,000 25,000 25,000 Total Secondary Liquidity 1,421,730 782,975 831,138 971,842 934,817 Total Primary and Secondary Liquidity $ 1,923,824 $ 1,379,678 $ 1,409,477 $ 1,497,593 $ 1,444,219 Ratio of Primary and Secondary Liquidity to Total Deposits 56.4 % 40.4 % 42.6 % 46.8 % 47.6 % Asset Quality Annualized net charge-offs (recoveries) as a percentage of average loans were 0.00% for the first quarter of 2023, fourth quarter of 2022 and first quarter of 2022. At March 31, 2023, the Company’s nonperforming assets, which include nonaccrual loans, loans past due 90 days and still accruing, and foreclosed assets, were $809,000, or 0.02% of total assets, as compared to $639,000, or 0.01% of total assets at December 31, 2022, and $706,000, or 0.02% of total assets at March 31, 2022. Loans that have potential weaknesses that warrant a watchlist risk rating at March 31, 2023 totaled $27.6 million, compared to $32.3 million at December 31, 2022, and $46.8 million at March 31, 2022. The increased uncertainty in the economic environment may result in future watchlist or adverse classifications in the loan portfolio. Loans that warranted a substandard risk rating at March 31, 2023 totaled $36.3 million, compared to $28.0 million at December 31, 2022, and $18.6 million at March 31, 2022. The linked-quarter increase was primarily due to the downgrade of one loan relationship. The following table presents a summary of asset quality measurements at the dates indicated: As of and for the Three Months Ended March 31, December 31, September 30, June 30, March 31, (dollars in thousands) 2023 2022 2022 2022 2022 Selected Asset Quality Data Loans 30-89 Days Past Due $ 21 $ 186 $ 38 $ 225 $ 13 Loans 30-89 Days Past Due to Total Loans 0.00 % 0.01 % 0.00 % 0.01 % 0.00 % Nonperforming Loans $ 693 $ 639 $ 663 $ 688 $ 706 Nonperforming Loans to Total Loans 0.02 % 0.02 % 0.02 % 0.02 % 0.02 % Foreclosed Assets $ 116 $ — $ — $ — $ — Nonaccrual Loans to Total Loans 0.02 % 0.02 % 0.02 % 0.02 % 0.02 % Nonaccrual Loans and Loans Past Due 90 Days and Still Accruing to Total Loans 0.02 0.02 0.02 0.02 0.02 Nonperforming Assets (1) $ 809 $ 639 $ 663 $ 688 $ 706 Nonperforming Assets to Total Assets (1) 0.02 % 0.01 % 0.02 % 0.02 % 0.02 % Allowance for Credit Losses to Total Loans 1.36 1.34 1.38 1.39 1.40 Allowance for Credit Losses to Nonaccrual Loans 7,236.36 7,511.11 7,012.22 6,498.69 5,905.38 Net Loan Charge-Offs (Recoveries) (Annualized) to Average Loans 0.00 0.00 (0.03 ) 0.00 0.00 _____________________________________ (1) Nonperforming assets are defined as nonaccrual loans plus loans 90 days past due and still accruing plus foreclosed assets. The Company will host a conference call to discuss its first quarter 2023 financial results on Thursday, April 27, 2023 at 8:00 a.m. Central Time. The conference call can be accessed by dialing 877-270-2148 and requesting to join the Bridgewater Bancshares earnings call. To listen to a replay of the conference call via phone, please dial 877-344-7529 and enter access code 7417750. The replay will be available through May 4, 2023. The conference call will also be available via a live webcast on the Investor Relations section of the Company’s website, investors.bridgewaterbankmn.com, and archived for replay. 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 $4.6 billion and seven branches as of March 31, 2023, 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, which has resulted in unrealized losses in our portfolio; business and economic conditions generally and in the financial services industry, nationally and within our market area, including rising rates of inflation; the effects of recent developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time at Silicon Valley Bank and Signature Bank that resulted in the failure of those institutions; 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 implementation of the Current Expected Credit Loss standard; the concentration of large loans to certain borrowers; the concentration of large deposits from certain clients, who have balances above current FDIC insurance limits and may withdraw deposits to diversify their exposure; our ability to successfully manage liquidity risk, which may increase our dependence on non-core funding sources such as brokered deposits, and negatively impact 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 expected discontinuation of 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 in response to the recent failures of Silicon Valley Bank and Signature Bank; risks related to climate change and the negative impact it may have on our customers and their businesses; 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 the Company 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. The Company undertakes 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) March 31, December 31, March 31, 2023 2022 2022 (Unaudited) (Unaudited) ASSETS Cash and Cash Equivalents $ 209,192 $ 87,043 $ 71,887 Bank-Owned Certificates of Deposit 1,225 1,181 1,139 Securities Available for Sale, at Fair Value 559,430 548,613 459,090 Loans, Net of Allowance for Credit Losses of $50,148 at March 31, 2023 (unaudited), $47,996 at December 31, 2022 and $41,692 at March 31, 2022 (unaudited) 3,625,477 3,512,157 2,937,210 Federal Home Loan Bank (FHLB) Stock, at Cost 28,632 19,606 6,846 Premises and Equipment, Net 47,801 48,445 49,044 Foreclosed Assets 116 — — Accrued Interest 13,377 13,479 9,596 Goodwill 2,626 2,626 2,626 Other Intangible Assets, Net 240 288 431 Bank-Owned Life Insurance 33,719 33,485 25,464 Other Assets 81,064 78,739 44,587 Total Assets $ 4,602,899 $ 4,345,662 $ 3,607,920 LIABILITIES AND EQUITY LIABILITIES Deposits: Noninterest Bearing $ 742,198 $ 884,272 $ 835,482 Interest Bearing 2,668,925 2,532,271 2,200,129 Total Deposits 3,411,123 3,416,543 3,035,611 Federal Funds Purchased 437,000 287,000 23,000 Notes Payable 13,750 13,750 — FHLB Advances 197,000 97,000 42,500 Subordinated Debentures, Net of Issuance Costs 79,001 78,905 92,349 Accrued Interest Payable 3,257 2,831 1,576 Other Liabilities 59,762 55,569 33,443 Total Liabilities 4,200,893 3,951,598 3,228,479 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 March 31, 2023 (unaudited), December 31, 2022, and March 31, 2022 (unaudited) 66,514 66,514 66,514 Common Stock- $0.01 par value; Authorized 75,000,000 Common Stock - Issued and Outstanding 27,845,244 at March 31, 2023 (unaudited), 27,751,950 at December 31, 2022 and 28,150,389 at March 31, 2022 (unaudited) 278 278 282 Additional Paid-In Capital 97,716 96,529 103,756 Retained Earnings 255,394 248,685 210,596 Accumulated Other Comprehensive Income (Loss) (17,896 ) (17,942 ) (1,707 ) Total Shareholders' Equity 402,006 394,064 379,441 Total Liabilities and Equity $ 4,602,899 $ 4,345,662 $ 3,607,920 Bridgewater Bancshares, Inc. and Subsidiaries Consolidated Statements of Income (dollars in thousands, except per share data) (Unaudited) Three Months Ended March 31, December 31, March 31, 2023 2022 2022 INTEREST INCOME Loans, Including Fees $ 44,955 $ 42,488 $ 31,744 Investment Securities 6,218 5,843 2,870 Other 819 529 80 Total Interest Income 51,992 48,860 34,694 INTEREST EXPENSE Deposits 16,374 10,781 3,158 Notes Payable 263 202 — FHLB Advances 861 575 150 Subordinated Debentures 983 1,030 1,197 Federal Funds Purchased 4,944 3,379 9 Total Interest Expense 23,425 15,967 4,514 NET INTEREST INCOME 28,567 32,893 30,180 Provision for Credit Losses 625 1,500 1,675 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 27,942 31,393 28,505 NONINTEREST INCOME Customer Service Fees 349 344 281 Net Gain (Loss) on Sales of Available for Sale Securities (56 ) 30 — Other Income 1,650 1,364 1,276 Total Noninterest Income 1,943 1,738 1,557 NONINTEREST EXPENSE Salaries and Employee Benefits 8,815 9,821 8,694 Occupancy and Equipment 1,209 1,177 1,085 Other Expense 4,159 4,205 3,729 Total Noninterest Expense 14,183 15,203 13,508 INCOME BEFORE INCOME TAXES 15,702 17,928 16,554 Provision for Income Taxes 4,060 4,193 4,292 NET INCOME 11,642 13,735 12,262 Preferred Stock Dividends (1,013 ) (1,014 ) (1,013 ) NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 10,629 $ 12,721 $ 11,249 EARNINGS PER SHARE Basic $ 0.38 $ 0.46 $ 0.40 Diluted 0.37 0.45 0.39 Bridgewater Bancshares, Inc. and Subsidiaries Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended March 31, December 31, March 31, 2023 2022 2022 Pre-Provision Net Revenue Noninterest Income $ 1,943 $ 1,738 $ 1,557 Less: (Gain) Loss on Sales of Securities 56 (30 ) — Less: FHLB Advance Prepayment Income (299 ) — — Total Operating Noninterest Income 1,700 1,708 1,557 Plus: Net Interest Income 28,567 32,893 30,180 Net Operating Revenue $ 30,267 $ 34,601 $ 31,737 Noninterest Expense $ 14,183 $ 15,203 $ 13,508 Less: Amortization of Tax Credit Investments (114 ) (114 ) (117 ) Total Operating Noninterest Expense $ 14,069 $ 15,089 $ 13,391 Pre-Provision Net Revenue $ 16,198 $ 19,512 $ 18,346 Plus: Non-Operating Revenue Adjustments 243 30 — Less: Provision for Credit Losses 625 1,500 1,675 Non-Operating Expense Adjustments 114 114 117 Provision for Income Taxes 4,060 4,193 4,292 Net Income $ 11,642 $ 13,735 $ 12,262 Average Assets $ 4,405,234 $ 4,251,345 $ 3,513,798 Pre-Provision Net Revenue Return on Average Assets 1.49 % 1.82 % 2.12 % As of and for the Three Months Ended March 31, December 31, March 31, 2023 2022 2022 Core Net Interest Margin Net Interest Income (Tax-Equivalent Basis) $ 28,947 $ 33,260 $ 30,438 Less: Loan Fees (998 ) (1,100 ) (1,743 ) Less: PPP Interest and Fees (2 ) (48 ) (563 ) Core Net Interest Income $ 27,947 $ 32,112 $ 28,132 Average Interest Earning Assets $ 4,323,706 $ 4,177,644 $ 3,430,774 Less: Average PPP Loans (999 ) (1,109 ) (18,140 ) Core Average Interest Earning Assets $ 4,322,707 $ 4,176,535 $ 3,412,634 Core Net Interest Margin 2.62 % 3.05 % 3.34 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended March 31, December 31, March 31, 2023 2022 2022 Efficiency Ratio Noninterest Expense $ 14,183 $ 15,203 $ 13,508 Less: Amortization of Intangible Assets (48 ) (48 ) (48 ) Adjusted Noninterest Expense $ 14,135 $ 15,155 $ 13,460 Net Interest Income 28,567 32,893 30,180 Noninterest Income 1,943 1,738 1,557 Less: (Gain) Loss on Sales of Securities 56 (30 ) — Adjusted Operating Revenue $ 30,566 $ 34,601 $ 31,737 Efficiency Ratio 46.2 % 43.8 % 42.4 % Adjusted Efficiency Ratio Noninterest Expense $ 14,183 $ 15,203 $ 13,508 Less: Amortization of Tax Credit Investments (114 ) (114 ) (117 ) Less: Amortization of Intangible Assets (48 ) (48 ) (48 ) Adjusted Noninterest Expense $ 14,021 $ 15,041 $ 13,343 Net Interest Income 28,567 32,893 30,180 Noninterest Income 1,943 1,738 1,557 Less: FHLB Advance Prepayment Income (299 ) — — Less: (Gain) Loss on Sales of Securities 56 (30 ) — Adjusted Operating Revenue $ 30,267 $ 34,601 $ 31,737 Adjusted Efficiency Ratio 46.3 % 43.5 % 42.0 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) As of and for the Three Months Ended March 31, December 31, March 31, 2023 2022 2022 Tangible Common Equity and Tangible Common Equity/Tangible Assets Total Shareholders' Equity $ 402,006 $ 394,064 $ 379,441 Less: Preferred Stock (66,514 ) (66,514 ) (66,514 ) Total Common Shareholders' Equity 335,492 327,550 312,927 Less: Intangible Assets (2,866 ) (2,914 ) (3,057 ) Tangible Common Equity $ 332,626 $ 324,636 $ 309,870 Total Assets $ 4,602,899 $ 4,345,662 $ 3,607,920 Less: Intangible Assets (2,866 ) (2,914 ) (3,057 ) Tangible Assets $ 4,600,033 $ 4,342,748 $ 3,604,863 Tangible Common Equity/Tangible Assets 7.23 % 7.48 % 8.60 % Tangible Book Value Per Share Book Value Per Common Share $ 12.05 $ 11.80 $ 11.12 Less: Effects of Intangible Assets (0.10 ) (0.11 ) (0.11 ) Tangible Book Value Per Common Share $ 11.95 $ 11.69 $ 11.01 Return on Average Tangible Common Equity Net Income Available to Common Shareholders $ 10,629 $ 12,721 $ 11,249 Average Shareholders' Equity $ 403,533 $ 387,589 $ 383,024 Less: Average Preferred Stock (66,514 ) (66,514 ) (66,514 ) Average Common Equity 337,019 321,075 316,510 Less: Effects of Average Intangible Assets (2,894 ) (2,941 ) (3,084 ) Average Tangible Common Equity $ 334,125 $ 318,134 $ 313,426 Return on Average Tangible Common Equity 12.90 % 15.86 % 14.56 % Three Months Ended March 31, December 31, September 30, June 30, March 31, 2023 2022 2022 2022 2022 Tangible Common Equity Total Shareholders' Equity $ 402,006 $ 394,064 $ 382,007 $ 374,883 $ 379,441 Less: Preferred Stock (66,514 ) (66,514 ) (66,514 ) (66,514 ) (66,514 ) Common Shareholders' Equity 335,492 327,550 315,493 308,369 312,927 Less: Intangible Assets (2,866 ) (2,914 ) (2,962 ) (3,009 ) (3,057 ) Tangible Common Equity $ 332,626 $ 324,636 $ 312,531 $ 305,360 $ 309,870 View source version on businesswire.com: https://www.businesswire.com/news/home/20230425006170/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 net income of $11.6 million for the first quarter of 2023, compared to $13.7 million for the fourth quarter of 2022, and $12.3 million for the first quarter of 2022. Earnings per diluted common share for the first quarter of 2023 were $0.37, compared to $0.45 per diluted common share for the fourth quarter of 2022, and $0.39 per diluted common share for the same period in 2022. “While first quarter results included well-controlled expenses, superb asset quality, moderated loan growth, and expected net interest margin pressure, our focus was on supporting our clients and demonstrating the resiliency of our balance sheet and business model,” said Chairman, Chief Executive Officer, and President, Jerry Baack. “Bridgewater is a relationship-focused bank supporting a local real estate and small business client base. With a strong balance sheet, including a diversified loan portfolio, high level of insured deposits, and ample liquidity and borrowing capacity, we feel well-positioned to continue executing on our proven and successful business model.” First Quarter 2023 Financial Results Diluted Nonperforming ROA PPNR ROA (1) ROE earnings per share Efficiency ratio (1) assets to total assets 1.07 % 1.49 % 11.70 % $ 0.37 46.2 % 0.02 % _____________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. First Quarter 2023 Highlights Annualized return on average assets (ROA) and annualized return on average shareholders’ equity (ROE) for the first quarter of 2023 were 1.07% and 11.70%, compared to ROA and ROE of 1.28% and 14.06%, respectively, for the fourth quarter of 2022. Annualized return on average tangible common equity, a non-GAAP financial measure, was 12.90% for the first quarter of 2023, compared to 15.86% for the fourth quarter of 2022. Gross loans increased $114.9 million, or 13.1% annualized, from the fourth quarter of 2022. Deposits decreased slightly by $5.4 million, or 0.6% annualized, from the fourth quarter of 2022. Net interest margin (on a fully tax-equivalent basis) was 2.72%, compared to 3.16% in the fourth quarter of 2022. Efficiency ratio, a non-GAAP financial measure, was 46.2%, compared to 43.8% for the fourth quarter of 2022. Noninterest expense declined $1.0 million, or 6.7%, from the fourth quarter of 2022. Annualized noninterest expense to average assets was 1.31%, compared to 1.42% for the fourth quarter of 2022. A credit loss provision of $1.5 million was recorded to support continued loan growth in the first quarter of 2023. The allowance for credit losses to total loans was 1.36% at March 31, 2023, compared to 1.34% at December 31, 2022. Annualized net loan charge-offs (recoveries) as a percentage of average loans were 0.00% for the first quarter of 2023 and for the fourth quarter of 2022. Tangible book value per share, a non-GAAP financial measure, increased $0.26, or 8.9% annualized, to $11.95 at March 31, 2023 compared to $11.69 at December 31, 2022. Key Financial Measures As of and for the Three Months Ended March 31, December 31, March 31, 2023 2022 2022 Per Common Share Data Basic Earnings Per Share $ 0.38 $ 0.46 $ 0.40 Diluted Earnings Per Share 0.37 0.45 0.39 Book Value Per Share 12.05 11.80 11.12 Tangible Book Value Per Share (1) 11.95 11.69 11.01 Basic Weighted Average Shares Outstanding 27,726,894 27,558,983 28,123,809 Diluted Weighted Average Shares Outstanding 28,490,046 28,527,306 29,156,085 Shares Outstanding at Period End 27,845,244 27,751,950 28,150,389 Selected Performance Ratios Return on Average Assets (Annualized) 1.07 % 1.28 % 1.42 % Pre-Provision Net Revenue Return on Average Assets (Annualized) (1) 1.49 1.82 2.12 Return on Average Shareholders' Equity (Annualized) 11.70 14.06 12.98 Return on Average Tangible Common Equity (Annualized) (1) 12.90 15.86 14.56 Yield on Interest Earning Assets (2) 4.91 4.67 4.13 Yield on Total Loans, Gross (2) 5.06 4.87 4.45 Cost of Total Deposits 2.01 1.31 0.43 Cost of Funds 2.41 1.67 0.59 Net Interest Margin (2) 2.72 3.16 3.60 Core Net Interest Margin (1)(2) 2.62 3.05 3.34 Efficiency Ratio (1) 46.2 43.8 42.4 Noninterest Expense to Average Assets (Annualized) 1.31 1.42 1.56 Loan to Deposit Ratio 108.0 104.5 98.4 Core Deposits to Total Deposits (3) 72.4 74.6 84.3 Tangible Common Equity to Tangible Assets (1) 7.23 7.48 8.60 Capital Ratios (Bank Only) (4) Tier 1 Leverage Ratio 10.61 % 10.76 % 11.13 % Common Equity Tier 1 Risk-based Capital Ratio 11.37 11.29 11.42 Tier 1 Risk-based Capital Ratio 11.37 11.29 11.42 Total Risk-based Capital Ratio 12.62 12.47 12.65 Capital Ratios (Consolidated) (4) Tier 1 Leverage Ratio 9.41 % 9.55 % 10.78 % Common Equity Tier 1 Risk-based Capital Ratio 8.48 8.40 9.13 Tier 1 Risk-based Capital Ratio 10.08 10.03 11.08 Total Risk-based Capital Ratio 13.25 13.15 15.02 _____________________________________ (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 March 31, December31, September 30, June 30, March 31, (dollars in thousands) 2023 2022 2022 2022 2022 Selected Balance Sheet Data Total Assets $ 4,602,899 $ 4,345,662 $ 4,128,987 $ 3,883,264 $ 3,607,920 Total Loans, Gross 3,684,360 3,569,446 3,380,082 3,225,885 2,987,967 Allowance for Credit Losses 50,148 47,996 46,491 44,711 41,692 Goodwill and Other Intangibles 2,866 2,914 2,962 3,009 3,057 Deposits 3,411,123 3,416,543 3,305,074 3,201,953 3,035,611 Tangible Common Equity (1) 332,626 324,636 312,531 305,360 309,870 Total Shareholders' Equity 402,006 394,064 382,007 374,883 379,441 Average Total Assets - Quarter-to-Date 4,405,234 4,251,345 3,948,201 3,743,575 3,513,798 Average Shareholders' Equity - Quarter-to-Date 403,533 387,589 384,020 381,448 383,024 _____________________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. For the Three Months Ended March 31, December 31, March 31, (dollars in thousands) 2023 2022 2022 Selected Income Statement Data Interest Income $ 51,992 $ 48,860 $ 34,694 Interest Expense 23,425 15,967 4,514 Net Interest Income 28,567 32,893 30,180 Provision for Credit Losses 625 1,500 1,675 Net Interest Income after Provision for Credit Losses 27,942 31,393 28,505 Noninterest Income 1,943 1,738 1,557 Noninterest Expense 14,183 15,203 13,508 Income Before Income Taxes 15,702 17,928 16,554 Provision for Income Taxes 4,060 4,193 4,292 Net Income 11,642 13,735 12,262 Preferred Stock Dividends (1,013 ) (1,014 ) (1,013 ) Net Income Available to Common Shareholders $ 10,629 $ 12,721 $ 11,249 Income Statement Net Interest Income Net interest income was $28.6 million for the first quarter of 2023, a decrease of $4.3 million, or 13.2%, from $32.9 million in the fourth quarter of 2022, and a decrease of $1.6 million, or 5.3%, from $30.2 million in the first quarter of 2022. The linked-quarter and year-over-year decrease in net interest income was primarily due to higher rates paid on deposits and increased borrowings in the rising interest rate environment. Average interest earning assets were $4.32 billion for the first quarter of 2023, an increase of $146.1 million, or 3.5%, from $4.18 billion for the fourth quarter of 2022, and an increase of $892.9 million, or 26.0%, from $3.43 billion for the first quarter of 2022. The linked-quarter increase in average interest earning assets was primarily due to continued growth in the loan portfolio. The year-over-year increase in average interest earning assets was primarily due to strong growth in the loan portfolio and 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 first quarter of 2023 was 2.72%, a 44 basis point decrease from 3.16% in the fourth quarter of 2022, and an 88 basis point decrease from 3.60% in the first 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, for the first quarter of 2023 was 2.62%, a 43 basis point decrease from 3.05% in the fourth quarter of 2022, and a 72 basis point decrease from 3.34% in the first quarter of 2022. The decline in the margin when compared to both prior periods was primarily due to higher funding costs and increased borrowings in the rising interest rate environment, offset partially by higher earning asset yields. Interest income was $52.0 million for the first quarter of 2023, an increase of $3.1 million, or 6.4%, from $48.9 million in the fourth quarter of 2022, and an increase of $17.3 million, or 49.9%, from $34.7 million in the first quarter of 2022. The yield on interest earning assets (on a fully tax-equivalent basis) was 4.91% in the first quarter of 2023, compared to 4.67% in the fourth quarter of 2022, and 4.13% in the first quarter of 2022. The linked-quarter increase in the yield on interest earning assets was primarily due to the increase in market interest rates resulting in new loan originations, loans repricing, and investment purchases to be 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 5.06% in the first quarter of 2023, which was 20 basis points higher than 4.86% in the fourth quarter of 2022, and 66 basis points higher than 4.40% in the first quarter of 2022. While loan fees have historically maintained a relatively stable contribution to the aggregate loan yield, the recent periods saw 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 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 Interest 4.95 % 4.74 % 4.42 % 4.17 % 4.15 % Fees 0.11 0.12 0.17 0.26 0.25 Yield on Loans, Excluding PPP Loans 5.06 % 4.86 % 4.59 % 4.43 % 4.40 % Interest expense was $23.4 million for the first quarter of 2023, an increase of $7.5 million, or 46.7%, from $16.0 million in the fourth quarter of 2022, and an increase of $18.9 million, or 418.9%, from $4.5 million in the first quarter of 2022. The cost of interest bearing liabilities increased 81 basis points on a linked-quarter basis from 2.22% in the fourth quarter of 2022 to 3.03% in the first quarter of 2023, 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. On a year-over-year basis, the cost of interest bearing liabilities increased 223 basis points from 0.80% in the first quarter of 2022 to 3.03% in the first quarter of 2023, primarily due to the rapid increase in market interest rates that occurred between the periods, which impacted all funding sources. Interest expense on deposits was $16.4 million for the first quarter of 2023, an increase of $5.6 million, or 51.9%, from $10.8 million in the fourth quarter of 2022, and an increase of $13.2 million, or 418.4%, from $3.2 million in the first quarter of 2022. The cost of total deposits increased 70 basis points on a linked-quarter basis from 1.31% in the fourth quarter of 2022, to 2.01% in the first quarter of 2023, primarily due to the rising interest rate environment and increased competition from other market alternatives. On a year-over-year basis, the cost of total deposits increased 158 basis points from 0.43% in the first quarter of 2022, to 2.01% in the first quarter of 2023, 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 March 31, 2023, December 31, 2022, and March 31, 2022 is as follows: For the Three Months Ended March 31, 2023 December 31, 2022 March 31, 2022 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 $ 63,253 $ 447 2.86 % $ 65,393 $ 366 2.22 % $ 80,497 $ 26 0.13 % Investment Securities: Taxable Investment Securities 574,242 5,958 4.21 540,601 5,268 3.87 373,021 2,255 2.45 Tax-Exempt Investment Securities (1) 29,803 330 4.49 67,867 728 4.26 71,591 779 4.41 Total Investment Securities 604,045 6,288 4.22 608,468 5,996 3.91 444,612 3,034 2.77 Paycheck Protection Program Loans (2) 999 2 1.00 1,109 48 17.06 18,140 563 12.58 Loans (1)(2) 3,629,447 45,263 5.06 3,481,041 42,654 4.86 2,881,845 31,275 4.40 Total Loans 3,630,446 45,265 5.06 3,482,150 42,702 4.87 2,899,985 31,838 4.45 Federal Home Loan Bank Stock 25,962 372 5.81 21,633 163 2.99 5,680 54 3.84 Total Interest Earning Assets 4,323,706 52,372 4.91 % 4,177,644 49,227 4.67 % 3,430,774 34,952 4.13 % Noninterest Earning Assets 81,528 73,701 83,024 Total Assets $ 4,405,234 $ 4,251,345 $ 3,513,798 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 461,372 $ 2,780 2.44 % $ 464,631 $ 2,013 1.72 % $ 566,279 $ 597 0.43 % Savings and Money Market Deposits 1,044,794 6,499 2.52 1,048,227 4,533 1.72 876,580 918 0.42 Time Deposits 248,174 1,069 1.75 281,334 1,007 1.42 288,914 745 1.05 Brokered Deposits 743,465 6,026 3.29 537,351 3,228 2.38 406,648 898 0.90 Total Interest Bearing Deposits 2,497,805 16,374 2.66 2,331,543 10,781 1.83 2,138,421 3,158 0.60 Federal Funds Purchased 415,111 4,944 4.83 340,471 3,379 3.94 10,600 9 0.35 Notes Payable 13,750 263 7.77 11,359 202 7.04 — — — FHLB Advances 128,222 861 2.72 94,103 575 2.42 42,500 150 1.43 Subordinated Debentures 78,945 983 5.05 81,242 1,030 5.03 92,286 1,197 5.26 Total Interest Bearing Liabilities 3,133,833 23,425 3.03 % 2,858,718 15,967 2.22 % 2,283,807 4,514 0.80 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 813,598 943,232 822,488 Other Noninterest Bearing Liabilities 54,270 61,806 24,479 Total Noninterest Bearing Liabilities 867,868 1,005,038 846,967 Shareholders' Equity 403,533 387,589 383,024 Total Liabilities and Shareholders' Equity $ 4,405,234 $ 4,251,345 $ 3,513,798 Net Interest Income / Interest Rate Spread 28,947 1.88 % 33,260 2.45 % 30,438 3.33 % Net Interest Margin (3) 2.72 % 3.16 % 3.60 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities and Loans (380 ) (367 ) (258 ) Net Interest Income $ 28,567 $ 32,893 $ 30,180 _____________________________________ (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 Credit Losses On January 1, 2023, the Company adopted Accounting Standards Update No. 2016-13 “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments,” more commonly referred to as “CECL.” Upon adoption of CECL, the Company’s allowance for credit losses on loans increased $650,000 and the allowance on unfunded commitments increased $4.9 million. The tax-effected impact of these two items totaled $3.9 million and was recorded as an adjustment to retained earnings as of January 1, 2023. The provision for credit losses was $1.5 million for both the first quarter of 2023 and the fourth quarter of 2022, compared to $1.7 million in the first quarter of 2022. The provision recorded in the first quarter of 2023 was primarily attributable to the more moderated growth of the loan portfolio. The allowance for credit losses to total loans was 1.36% at March 31, 2023, compared to 1.34% at December 31, 2022, and 1.40% at March 31, 2022. The following table presents the activity in the Company’s allowance for credit losses for the periods indicated: Three Months Ended March 31, December 31, March 31, (dollars in thousands) 2023 2022 2022 Balance at Beginning of Period $ 47,996 $ 46,491 $ 40,020 Impact of Adopting CECL 650 — — Provision for Credit Losses 1,500 1,500 1,675 Charge-offs (4 ) (3 ) (15 ) Recoveries 6 8 12 Balance at End of Period $ 50,148 $ 47,996 $ 41,692 The provision for unfunded commitments was a negative provision of ($875,000) for the first quarter of 2023 and zero for both the fourth quarter of 2022 and first quarter of 2022. The negative provision during the quarter was due to a reduction in outstanding unfunded commitments primarily attributable to the migration to funded loans. Noninterest Income Noninterest income was $1.9 million for the first quarter of 2023, an increase of $205,000 from $1.74 million for the fourth quarter of 2022, and an increase of $386,000 from $1.6 million for the first quarter of 2022. The linked-quarter increase was primarily due to an increase in letter of credit fees and FHLB prepayment income, offset partially by a decrease in other income. The year-over-year increase was primarily due to increased letter of credit fees and FHLB prepayment income, offset partially by no recorded swap fees. The following table presents the major components of noninterest income for the periods indicated: Three Months Ended March 31, December 31, March 31, (dollars in thousands) 2023 2022 2022 Noninterest Income: Customer Service Fees $ 349 $ 344 $ 281 Net Gain (Loss) on Sales of Securities (56 ) 30 — Letter of Credit Fees 634 358 242 Debit Card Interchange Fees 138 148 133 Swap Fees — — 557 Bank-Owned Life Insurance 234 238 148 FHLB Prepayment Income 299 — — Other Income 345 620 196 Totals $ 1,943 $ 1,738 $ 1,557 Noninterest Expense Noninterest expense was $14.2 million for the first quarter of 2023, a decrease of $1.0 million from $15.2 million for the fourth quarter of 2022, and an increase of $675,000 from $13.5 million for the first quarter of 2022. The linked-quarter decrease was primarily due to decreases in salaries and employee benefits resulting from lower discretionary incentive accruals. The year-over-year increase was primarily attributable to increases in the FDIC insurance assessment and derivative collateral fees, offset partially by declines in marketing and advertising and other expense. The following table presents the major components of noninterest expense for the periods indicated: Three Months Ended March 31, December 31, March 31, (dollars in thousands) 2023 2023 2022 Noninterest Expense: Salaries and Employee Benefits $ 8,815 $ 9,821 $ 8,694 Occupancy and Equipment 1,209 1,177 1,085 FDIC Insurance Assessment 665 360 360 Data Processing 357 371 297 Professional and Consulting Fees 755 635 696 Derivative Collateral Fees 380 535 2 Information Technology and Telecommunications 683 673 578 Marketing and Advertising 262 403 626 Intangible Asset Amortization 48 48 48 Amortization of Tax Credit Investments 114 114 117 Other Expense 895 1,066 1,005 Totals $ 14,183 $ 15,203 $ 13,508 The Company had 246 full-time equivalent employees at both March 31, 2023 and December 31, 2022, and 229 employees at March 31, 2022. The efficiency ratio, a non-GAAP financial measure, was 46.2% for the first quarter of 2023, compared to 43.8% for the fourth quarter of 2022, and 42.4% for the first quarter of 2022. Income Taxes The effective combined federal and state income tax rate for the first quarter of 2023 was 25.9%, an increase from 23.4% for the fourth quarter of 2022 and consistent with 25.9% for the first quarter of 2022. Balance Sheet Total assets at March 31, 2023 were $4.60 billion, a 5.9% increase from $4.35 billion at December 31, 2022, and a 27.6% increase from $3.61 billion at March 31, 2022. The linked-quarter increase in total assets was primarily due to continued loan growth and an increase in cash and cash equivalent balances. The year-over-year increase in total assets was primarily due to strong loan growth, purchases of investment securities and an increase in cash and cash equivalent balances. Total gross loans at March 31, 2023 were $3.68 billion, an increase of $114.9 million, or 3.2%, over total gross loans of $3.57 billion at December 31, 2022, and an increase of $696.4 million, or 23.3%, over total gross loans of $2.99 billion at March 31, 2022. The increase in the loan portfolio during the first quarter of 2023 was primarily due to growth across all segments. The following table presents the dollar composition of the Company’s loan portfolio, by category, at the dates indicated: March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 (dollars in thousands) Commercial $ 454,193 $ 435,344 $ 412,448 $ 403,569 $ 363,290 Paycheck Protection Program 963 1,049 1,192 4,860 12,309 Construction and Land Development 312,277 295,554 280,380 305,552 272,333 1-4 Family Construction 85,797 70,242 55,177 53,639 48,798 Real Estate Mortgage: 1 - 4 Family Mortgage 380,210 355,474 341,102 334,815 312,201 Multifamily 1,320,081 1,306,738 1,230,509 1,087,865 1,012,623 CRE Owner Occupied 158,650 149,905 151,088 142,214 117,969 CRE Nonowner Occupied 962,671 947,008 900,691 886,432 840,463 Total Real Estate Mortgage Loans 2,821,612 2,759,125 2,623,390 2,451,326 2,283,256 Consumer and Other 9,518 8,132 7,495 6,939 7,981 Total Loans, Gross 3,684,360 3,569,446 3,380,082 3,225,885 2,987,967 Allowance for Loan Losses (50,148 ) (47,996 ) (46,491 ) (44,711 ) (41,692 ) Net Deferred Loan Fees (8,735 ) (9,293 ) (9,088 ) (9,536 ) (9,065 ) Total Loans, Net $ 3,625,477 $ 3,512,157 $ 3,324,503 $ 3,171,638 $ 2,937,210 Total deposits at March 31, 2023 were $3.41 billion, a decrease of $5.4 million, or 0.2%, over total deposits of $3.42 billion at December 31, 2022, and an increase of $375.5 million, or 12.4%, over total deposits of $3.04 billion at March 31, 2022. Deposits decreased slightly in the first quarter of 2023 primarily due to a decrease in noninterest bearing deposits and savings and money market deposits, offset by an increase in interest bearing deposits and brokered deposits. Brokered deposits were being used as a supplemental funding source, as needed, to support the loan portfolio growth. Uninsured deposits as of March 31, 2023 were 24% of total deposits, down from 38% as of December 31, 2022. The following table presents the dollar composition of the Company’s deposit portfolio, by category, at the dates indicated: March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 (dollars in thousands) Noninterest Bearing Transaction Deposits $ 742,198 $ 884,272 $ 961,084 $ 961,998 $ 835,482 Interest Bearing Transaction Deposits 630,037 451,992 510,396 522,151 598,402 Savings and Money Market Deposits 913,013 1,031,873 1,077,333 952,138 890,926 Time Deposits 266,213 272,253 293,052 272,424 286,674 Brokered Deposits 859,662 776,153 463,209 493,242 424,127 Total Deposits $ 3,411,123 $ 3,416,543 $ 3,305,074 $ 3,201,953 $ 3,035,611 Capital Total shareholders’ equity at March 31, 2023 was $402.0 million, an increase of $7.9 million, or 2.0%, compared to total shareholders’ equity of $394.1 million at December 31, 2022, and an increase of $22.6 million, or 5.9%, over total shareholders’ equity of $379.4 million at March 31, 2022. The linked-quarter increase was due to net income retained, offset partially by the adoption of CECL and preferred stock dividends. The year-over-year increase was due to net income retained and unrealized gains in the derivatives portfolio, offset partially by an increase in unrealized losses in the securities portfolio, stock repurchases, the adoption of CECL and preferred stock dividends. The Company did not purchase any shares of its common stock during the first quarter of 2023. Tangible book value per share, a non-GAAP financial measure, was $11.95 as of March 31, 2023, an increase of 2.2% from $11.69 as of December 31, 2022, and an increase of 8.5% from $11.01 as of March 31, 2022. The linked-quarter and year-over-year increases occurred despite the market value depreciation of the securities portfolio driven by the rapidly rising interest rate environment. Tangible common equity as a percentage of tangible assets, a non-GAAP financial measure, was 7.23% at March 31, 2023, compared to 7.48% at December 31, 2022, and 8.60% at March 31, 2022. 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 June 1, 2023 to shareholders of record of the Series A Preferred Stock at the close of business on May 15, 2023. Liquidity Total on- and off-balance sheet liquidity was $1.92 billion as of March 31, 2023, compared to $1.38 billion at December 31, 2022 and $1.44 billion at March 31, 2022. During the first quarter of 2023, the Company took a number of actions to increase its total liquidity by more than $500 million, including pledging loans and securities to create additional borrowing capacity at the Federal Reserve Bank and increasing its cash on the balance sheet. The Company did not utilize the Bank Term Funding Program (BTFP) or Federal Reserve Discount Window during the first quarter of 2023. Primary Liquidity—On-Balance Sheet March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 (dollars in thousands) Cash and Cash Equivalents $ 177,116 $ 48,090 $ 36,332 $ 43,168 $ 50,312 Securities Available for Sale 559,430 548,613 542,007 482,583 459,090 Less: Pledged Securities (234,452 ) — — — — Total Primary Liquidity $ 502,094 $ 596,703 $ 578,339 $ 525,751 $ 509,402 Ratio of Primary Liquidity to Total Deposits 14.7 % 17.5 % 17.5 % 16.4 % 16.8 % Secondary Liquidity—Off-Balance Sheet Borrowing Capacity Net Secured Borrowing Capacity with the FHLB $ 246,795 $ 390,898 $ 426,604 $ 569,076 $ 542,489 Net Secured Borrowing Capacity with the Federal Reserve Bank 990,685 157,827 156,534 169,766 159,328 Unsecured Borrowing Capacity with Correspondent Lenders 158,000 208,000 208,000 208,000 208,000 Secured Borrowing Capacity with Correspondent Lender 26,250 26,250 40,000 25,000 25,000 Total Secondary Liquidity 1,421,730 782,975 831,138 971,842 934,817 Total Primary and Secondary Liquidity $ 1,923,824 $ 1,379,678 $ 1,409,477 $ 1,497,593 $ 1,444,219 Ratio of Primary and Secondary Liquidity to Total Deposits 56.4 % 40.4 % 42.6 % 46.8 % 47.6 % Asset Quality Annualized net charge-offs (recoveries) as a percentage of average loans were 0.00% for the first quarter of 2023, fourth quarter of 2022 and first quarter of 2022. At March 31, 2023, the Company’s nonperforming assets, which include nonaccrual loans, loans past due 90 days and still accruing, and foreclosed assets, were $809,000, or 0.02% of total assets, as compared to $639,000, or 0.01% of total assets at December 31, 2022, and $706,000, or 0.02% of total assets at March 31, 2022. Loans that have potential weaknesses that warrant a watchlist risk rating at March 31, 2023 totaled $27.6 million, compared to $32.3 million at December 31, 2022, and $46.8 million at March 31, 2022. The increased uncertainty in the economic environment may result in future watchlist or adverse classifications in the loan portfolio. Loans that warranted a substandard risk rating at March 31, 2023 totaled $36.3 million, compared to $28.0 million at December 31, 2022, and $18.6 million at March 31, 2022. The linked-quarter increase was primarily due to the downgrade of one loan relationship. The following table presents a summary of asset quality measurements at the dates indicated: As of and for the Three Months Ended March 31, December 31, September 30, June 30, March 31, (dollars in thousands) 2023 2022 2022 2022 2022 Selected Asset Quality Data Loans 30-89 Days Past Due $ 21 $ 186 $ 38 $ 225 $ 13 Loans 30-89 Days Past Due to Total Loans 0.00 % 0.01 % 0.00 % 0.01 % 0.00 % Nonperforming Loans $ 693 $ 639 $ 663 $ 688 $ 706 Nonperforming Loans to Total Loans 0.02 % 0.02 % 0.02 % 0.02 % 0.02 % Foreclosed Assets $ 116 $ — $ — $ — $ — Nonaccrual Loans to Total Loans 0.02 % 0.02 % 0.02 % 0.02 % 0.02 % Nonaccrual Loans and Loans Past Due 90 Days and Still Accruing to Total Loans 0.02 0.02 0.02 0.02 0.02 Nonperforming Assets (1) $ 809 $ 639 $ 663 $ 688 $ 706 Nonperforming Assets to Total Assets (1) 0.02 % 0.01 % 0.02 % 0.02 % 0.02 % Allowance for Credit Losses to Total Loans 1.36 1.34 1.38 1.39 1.40 Allowance for Credit Losses to Nonaccrual Loans 7,236.36 7,511.11 7,012.22 6,498.69 5,905.38 Net Loan Charge-Offs (Recoveries) (Annualized) to Average Loans 0.00 0.00 (0.03 ) 0.00 0.00 _____________________________________ (1) Nonperforming assets are defined as nonaccrual loans plus loans 90 days past due and still accruing plus foreclosed assets. The Company will host a conference call to discuss its first quarter 2023 financial results on Thursday, April 27, 2023 at 8:00 a.m. Central Time. The conference call can be accessed by dialing 877-270-2148 and requesting to join the Bridgewater Bancshares earnings call. To listen to a replay of the conference call via phone, please dial 877-344-7529 and enter access code 7417750. The replay will be available through May 4, 2023. The conference call will also be available via a live webcast on the Investor Relations section of the Company’s website, investors.bridgewaterbankmn.com, and archived for replay. 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 $4.6 billion and seven branches as of March 31, 2023, 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, which has resulted in unrealized losses in our portfolio; business and economic conditions generally and in the financial services industry, nationally and within our market area, including rising rates of inflation; the effects of recent developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time at Silicon Valley Bank and Signature Bank that resulted in the failure of those institutions; 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 implementation of the Current Expected Credit Loss standard; the concentration of large loans to certain borrowers; the concentration of large deposits from certain clients, who have balances above current FDIC insurance limits and may withdraw deposits to diversify their exposure; our ability to successfully manage liquidity risk, which may increase our dependence on non-core funding sources such as brokered deposits, and negatively impact 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 expected discontinuation of 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 in response to the recent failures of Silicon Valley Bank and Signature Bank; risks related to climate change and the negative impact it may have on our customers and their businesses; 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 the Company 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. The Company undertakes 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) March 31, December 31, March 31, 2023 2022 2022 (Unaudited) (Unaudited) ASSETS Cash and Cash Equivalents $ 209,192 $ 87,043 $ 71,887 Bank-Owned Certificates of Deposit 1,225 1,181 1,139 Securities Available for Sale, at Fair Value 559,430 548,613 459,090 Loans, Net of Allowance for Credit Losses of $50,148 at March 31, 2023 (unaudited), $47,996 at December 31, 2022 and $41,692 at March 31, 2022 (unaudited) 3,625,477 3,512,157 2,937,210 Federal Home Loan Bank (FHLB) Stock, at Cost 28,632 19,606 6,846 Premises and Equipment, Net 47,801 48,445 49,044 Foreclosed Assets 116 — — Accrued Interest 13,377 13,479 9,596 Goodwill 2,626 2,626 2,626 Other Intangible Assets, Net 240 288 431 Bank-Owned Life Insurance 33,719 33,485 25,464 Other Assets 81,064 78,739 44,587 Total Assets $ 4,602,899 $ 4,345,662 $ 3,607,920 LIABILITIES AND EQUITY LIABILITIES Deposits: Noninterest Bearing $ 742,198 $ 884,272 $ 835,482 Interest Bearing 2,668,925 2,532,271 2,200,129 Total Deposits 3,411,123 3,416,543 3,035,611 Federal Funds Purchased 437,000 287,000 23,000 Notes Payable 13,750 13,750 — FHLB Advances 197,000 97,000 42,500 Subordinated Debentures, Net of Issuance Costs 79,001 78,905 92,349 Accrued Interest Payable 3,257 2,831 1,576 Other Liabilities 59,762 55,569 33,443 Total Liabilities 4,200,893 3,951,598 3,228,479 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 March 31, 2023 (unaudited), December 31, 2022, and March 31, 2022 (unaudited) 66,514 66,514 66,514 Common Stock- $0.01 par value; Authorized 75,000,000 Common Stock - Issued and Outstanding 27,845,244 at March 31, 2023 (unaudited), 27,751,950 at December 31, 2022 and 28,150,389 at March 31, 2022 (unaudited) 278 278 282 Additional Paid-In Capital 97,716 96,529 103,756 Retained Earnings 255,394 248,685 210,596 Accumulated Other Comprehensive Income (Loss) (17,896 ) (17,942 ) (1,707 ) Total Shareholders' Equity 402,006 394,064 379,441 Total Liabilities and Equity $ 4,602,899 $ 4,345,662 $ 3,607,920 Bridgewater Bancshares, Inc. and Subsidiaries Consolidated Statements of Income (dollars in thousands, except per share data) (Unaudited) Three Months Ended March 31, December 31, March 31, 2023 2022 2022 INTEREST INCOME Loans, Including Fees $ 44,955 $ 42,488 $ 31,744 Investment Securities 6,218 5,843 2,870 Other 819 529 80 Total Interest Income 51,992 48,860 34,694 INTEREST EXPENSE Deposits 16,374 10,781 3,158 Notes Payable 263 202 — FHLB Advances 861 575 150 Subordinated Debentures 983 1,030 1,197 Federal Funds Purchased 4,944 3,379 9 Total Interest Expense 23,425 15,967 4,514 NET INTEREST INCOME 28,567 32,893 30,180 Provision for Credit Losses 625 1,500 1,675 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 27,942 31,393 28,505 NONINTEREST INCOME Customer Service Fees 349 344 281 Net Gain (Loss) on Sales of Available for Sale Securities (56 ) 30 — Other Income 1,650 1,364 1,276 Total Noninterest Income 1,943 1,738 1,557 NONINTEREST EXPENSE Salaries and Employee Benefits 8,815 9,821 8,694 Occupancy and Equipment 1,209 1,177 1,085 Other Expense 4,159 4,205 3,729 Total Noninterest Expense 14,183 15,203 13,508 INCOME BEFORE INCOME TAXES 15,702 17,928 16,554 Provision for Income Taxes 4,060 4,193 4,292 NET INCOME 11,642 13,735 12,262 Preferred Stock Dividends (1,013 ) (1,014 ) (1,013 ) NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 10,629 $ 12,721 $ 11,249 EARNINGS PER SHARE Basic $ 0.38 $ 0.46 $ 0.40 Diluted 0.37 0.45 0.39 Bridgewater Bancshares, Inc. and Subsidiaries Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended March 31, December 31, March 31, 2023 2022 2022 Pre-Provision Net Revenue Noninterest Income $ 1,943 $ 1,738 $ 1,557 Less: (Gain) Loss on Sales of Securities 56 (30 ) — Less: FHLB Advance Prepayment Income (299 ) — — Total Operating Noninterest Income 1,700 1,708 1,557 Plus: Net Interest Income 28,567 32,893 30,180 Net Operating Revenue $ 30,267 $ 34,601 $ 31,737 Noninterest Expense $ 14,183 $ 15,203 $ 13,508 Less: Amortization of Tax Credit Investments (114 ) (114 ) (117 ) Total Operating Noninterest Expense $ 14,069 $ 15,089 $ 13,391 Pre-Provision Net Revenue $ 16,198 $ 19,512 $ 18,346 Plus: Non-Operating Revenue Adjustments 243 30 — Less: Provision for Credit Losses 625 1,500 1,675 Non-Operating Expense Adjustments 114 114 117 Provision for Income Taxes 4,060 4,193 4,292 Net Income $ 11,642 $ 13,735 $ 12,262 Average Assets $ 4,405,234 $ 4,251,345 $ 3,513,798 Pre-Provision Net Revenue Return on Average Assets 1.49 % 1.82 % 2.12 % As of and for the Three Months Ended March 31, December 31, March 31, 2023 2022 2022 Core Net Interest Margin Net Interest Income (Tax-Equivalent Basis) $ 28,947 $ 33,260 $ 30,438 Less: Loan Fees (998 ) (1,100 ) (1,743 ) Less: PPP Interest and Fees (2 ) (48 ) (563 ) Core Net Interest Income $ 27,947 $ 32,112 $ 28,132 Average Interest Earning Assets $ 4,323,706 $ 4,177,644 $ 3,430,774 Less: Average PPP Loans (999 ) (1,109 ) (18,140 ) Core Average Interest Earning Assets $ 4,322,707 $ 4,176,535 $ 3,412,634 Core Net Interest Margin 2.62 % 3.05 % 3.34 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended March 31, December 31, March 31, 2023 2022 2022 Efficiency Ratio Noninterest Expense $ 14,183 $ 15,203 $ 13,508 Less: Amortization of Intangible Assets (48 ) (48 ) (48 ) Adjusted Noninterest Expense $ 14,135 $ 15,155 $ 13,460 Net Interest Income 28,567 32,893 30,180 Noninterest Income 1,943 1,738 1,557 Less: (Gain) Loss on Sales of Securities 56 (30 ) — Adjusted Operating Revenue $ 30,566 $ 34,601 $ 31,737 Efficiency Ratio 46.2 % 43.8 % 42.4 % Adjusted Efficiency Ratio Noninterest Expense $ 14,183 $ 15,203 $ 13,508 Less: Amortization of Tax Credit Investments (114 ) (114 ) (117 ) Less: Amortization of Intangible Assets (48 ) (48 ) (48 ) Adjusted Noninterest Expense $ 14,021 $ 15,041 $ 13,343 Net Interest Income 28,567 32,893 30,180 Noninterest Income 1,943 1,738 1,557 Less: FHLB Advance Prepayment Income (299 ) — — Less: (Gain) Loss on Sales of Securities 56 (30 ) — Adjusted Operating Revenue $ 30,267 $ 34,601 $ 31,737 Adjusted Efficiency Ratio 46.3 % 43.5 % 42.0 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) As of and for the Three Months Ended March 31, December 31, March 31, 2023 2022 2022 Tangible Common Equity and Tangible Common Equity/Tangible Assets Total Shareholders' Equity $ 402,006 $ 394,064 $ 379,441 Less: Preferred Stock (66,514 ) (66,514 ) (66,514 ) Total Common Shareholders' Equity 335,492 327,550 312,927 Less: Intangible Assets (2,866 ) (2,914 ) (3,057 ) Tangible Common Equity $ 332,626 $ 324,636 $ 309,870 Total Assets $ 4,602,899 $ 4,345,662 $ 3,607,920 Less: Intangible Assets (2,866 ) (2,914 ) (3,057 ) Tangible Assets $ 4,600,033 $ 4,342,748 $ 3,604,863 Tangible Common Equity/Tangible Assets 7.23 % 7.48 % 8.60 % Tangible Book Value Per Share Book Value Per Common Share $ 12.05 $ 11.80 $ 11.12 Less: Effects of Intangible Assets (0.10 ) (0.11 ) (0.11 ) Tangible Book Value Per Common Share $ 11.95 $ 11.69 $ 11.01 Return on Average Tangible Common Equity Net Income Available to Common Shareholders $ 10,629 $ 12,721 $ 11,249 Average Shareholders' Equity $ 403,533 $ 387,589 $ 383,024 Less: Average Preferred Stock (66,514 ) (66,514 ) (66,514 ) Average Common Equity 337,019 321,075 316,510 Less: Effects of Average Intangible Assets (2,894 ) (2,941 ) (3,084 ) Average Tangible Common Equity $ 334,125 $ 318,134 $ 313,426 Return on Average Tangible Common Equity 12.90 % 15.86 % 14.56 % Three Months Ended March 31, December 31, September 30, June 30, March 31, 2023 2022 2022 2022 2022 Tangible Common Equity Total Shareholders' Equity $ 402,006 $ 394,064 $ 382,007 $ 374,883 $ 379,441 Less: Preferred Stock (66,514 ) (66,514 ) (66,514 ) (66,514 ) (66,514 ) Common Shareholders' Equity 335,492 327,550 315,493 308,369 312,927 Less: Intangible Assets (2,866 ) (2,914 ) (2,962 ) (3,009 ) (3,057 ) Tangible Common Equity $ 332,626 $ 324,636 $ 312,531 $ 305,360 $ 309,870 View source version on businesswire.com: https://www.businesswire.com/news/home/20230425006170/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
