Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil Hydroworld Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Bridgewater Bancshares, Inc. Announces Second Quarter 2023 Net Income of $9.8 Million, $0.31 Diluted Earnings Per Common Share By: Bridgewater Bancshares, Inc. via Business Wire July 26, 2023 at 16:15 PM EDT Second Quarter 2023 Highlights Annualized return on average assets (ROA) of 0.88%, compared to 1.07% for the first quarter of 2023. Annualized return on average shareholders’ equity (ROE) of 9.69%, compared to 11.70% for the first quarter of 2023, and annualized return on average tangible common equity (ROATCE)(1) of 10.48%, compared to 12.90% for the first quarter of 2023. Gross loans increased $51.9 million, or 5.6% annualized, from the first quarter of 2023. Deposits increased by $166.8 million, or 19.6% annualized, from the first quarter of 2023, including an increase of core deposits(2) of $45.3 million, or 7.4% annualized. Total borrowing capacity of $1.5 billion at June 30, 2023, compared to $783.0 million at December 31, 2022. Net interest margin (on a fully tax-equivalent basis) of 2.40%, compared to 2.72% in the first quarter of 2023. Efficiency ratio(1) of 52.7%, compared to 46.2% for the first quarter of 2023. Noninterest expense increased slightly by $205,000, or 1.4%, from the first quarter of 2023, with annualized noninterest expense to average assets of 1.29%, compared to 1.31% for the first quarter of 2023. A credit loss provision of $550,000 was recorded to support continued loan growth, with allowance for credit losses to total loans of 1.36% at both June 30, 2023 and March 31, 2023. Annualized net loan charge-offs (recoveries) as a percentage of average loans of 0.00% for the second quarter of 2023, in-line with the first quarter of 2023. Nonperforming assets to total assets of 0.02% at June 30, 2023 and March 31, 2023. Tangible book value per share(1) of $12.15 at June 30, 2023, an increase of $0.20, or 6.7% annualized, compared to $11.95 at March 31, 2023. (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. (2) Core deposits are defined as total deposits less brokered deposits and certificates of deposit greater than $250,000. Bridgewater Bancshares, Inc. (Nasdaq: BWB) (the Company), the parent company of Bridgewater Bank (the Bank), today announced net income of $9.8 million for the second quarter of 2023, compared to $11.6 million for the first quarter of 2023, and $12.9 million for the second quarter of 2022. Earnings per diluted common share for the second quarter of 2023 were $0.31, compared to $0.37 per diluted common share for the first quarter of 2023, and $0.41 per diluted common share for the same period in 2022. “Bridgewater’s second quarter results were highlighted by several improving financial trends as we continue to manage the business through a challenging banking environment,” said Chairman, Chief Executive Officer, and President, Jerry Baack. “The overall composition of our balance sheet improved with a strong inflow of deposits, including growth in core deposits, and a reduction in overall borrowings. While our net interest margin remained under pressure, we saw the pace of compression slow noticeably on a month-to-month basis during the quarter. In addition, noninterest expense was again well controlled and asset quality remained superb.” “During the quarter, our teams maintained their focus on supporting and growing our client base, both by proactively engaging with our existing clients and cultivating new relationships across the Twin Cities market. In July, we also relocated our downtown Minneapolis branch to an enhanced location with more space to better serve our clients. We believe our proven ability to develop strong client relationships, combined with encouraging financial trends, will continue to drive success moving forward.” Key Financial Measures As of and for the Three Months Ended As of and for the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2023 2023 2022 2023 2022 Per Common Share Data Basic Earnings Per Share $ 0.32 $ 0.38 $ 0.43 $ 0.70 $ 0.83 Diluted Earnings Per Share 0.31 0.37 0.41 0.69 0.80 Book Value Per Share 12.25 12.05 11.14 12.25 11.14 Tangible Book Value Per Share (1) 12.15 11.95 11.03 12.15 11.03 Basic Weighted Average Shares Outstanding 27,886,425 27,726,894 27,839,260 27,807,100 27,980,749 Diluted Weighted Average Shares Outstanding 28,198,739 28,490,046 28,803,842 28,350,705 28,991,780 Shares Outstanding at Period End 27,973,995 27,845,244 27,677,372 27,973,995 27,677,372 Selected Performance Ratios Return on Average Assets (Annualized) 0.88 % 1.07 % 1.38 % 0.97 % 1.40 % Pre-Provision Net Revenue Return on Average Assets (Annualized) (1) 1.16 1.49 2.19 1.32 2.16 Return on Average Shareholders' Equity (Annualized) 9.69 11.70 13.55 10.69 13.27 Return on Average Tangible Common Equity (Annualized) (1) 10.48 12.90 15.26 11.68 14.91 Yield on Interest Earning Assets (2) 5.06 4.91 4.16 4.99 4.15 Yield on Total Loans, Gross (2) 5.19 5.06 4.45 5.12 4.45 Cost of Total Deposits 2.66 2.01 0.46 2.34 0.44 Cost of Funds 2.91 2.41 0.63 2.66 0.61 Net Interest Margin (2) 2.40 2.72 3.58 2.55 3.59 Core Net Interest Margin (1)(2) 2.31 2.62 3.34 2.47 3.34 Efficiency Ratio (1) 52.7 46.2 40.2 49.3 41.2 Noninterest Expense to Average Assets (Annualized) 1.29 1.31 1.47 1.30 1.51 Loan to Deposit Ratio 104.4 108.0 100.7 Core Deposits to Total Deposits (3) 70.3 72.4 82.9 Tangible Common Equity to Tangible Assets (1) 7.39 7.23 7.87 Capital Ratios (Bank Only) (4) Tier 1 Leverage Ratio 10.69 % 10.61 % 11.43 % Common Equity Tier 1 Risk-based Capital Ratio 11.66 11.37 11.53 Tier 1 Risk-based Capital Ratio 11.66 11.37 11.53 Total Risk-based Capital Ratio 12.91 12.62 12.74 Capital Ratios (Consolidated) (4) Tier 1 Leverage Ratio 9.47 % 9.41 % 10.33 % Common Equity Tier 1 Risk-based Capital Ratio 8.72 8.48 8.50 Tier 1 Risk-based Capital Ratio 10.33 10.08 10.29 Total Risk-based Capital Ratio 13.50 13.25 13.98 ______________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. (2) Amounts calculated on a tax-equivalent basis using the statutory federal tax rate of 21%. (3) Core deposits are defined as total deposits less brokered deposits and certificates of deposit greater than $250,000. (4) Preliminary data. Current period subject to change prior to filings with applicable regulatory agencies. Selected Financial Data June 30, March 31, December 31, September 30, June 30, (dollars in thousands) 2023 2023 2022 2022 2022 Selected Balance Sheet Data Total Assets $ 4,603,185 $ 4,602,899 $ 4,345,662 $ 4,128,987 $ 3,883,264 Total Loans, Gross 3,736,211 3,684,360 3,569,446 3,380,082 3,225,885 Allowance for Credit Losses 50,701 50,148 47,996 46,491 44,711 Goodwill and Other Intangibles 2,832 2,866 2,914 2,962 3,009 Deposits 3,577,932 3,411,123 3,416,543 3,305,074 3,201,953 Tangible Common Equity (1) 339,780 332,626 324,636 312,531 305,360 Total Shareholders' Equity 409,126 402,006 394,064 382,007 374,883 Average Total Assets - Quarter-to-Date 4,483,662 4,405,234 4,251,345 3,948,201 3,743,575 Average Shareholders' Equity - Quarter-to-Date 406,347 403,533 387,589 384,020 381,448 ______________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. For the Three Months Ended For the Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2023 2023 2022 2023 2022 Selected Income Statement Data Interest Income $ 55,001 $ 51,992 $ 37,782 $ 106,993 $ 72,476 Interest Expense 29,129 23,425 5,252 52,554 9,766 Net Interest Income 25,872 28,567 32,530 54,439 62,710 Provision for Credit Losses 50 625 3,025 675 4,700 Net Interest Income after Provision for Credit Losses 25,822 27,942 29,505 53,764 58,010 Noninterest Income 1,415 1,943 1,650 3,358 3,207 Noninterest Expense 14,388 14,183 13,752 28,571 27,260 Income Before Income Taxes 12,849 15,702 17,403 28,551 33,957 Provision for Income Taxes 3,033 4,060 4,521 7,093 8,813 Net Income 9,816 11,642 12,882 21,458 25,144 Preferred Stock Dividends (1,014 ) (1,013 ) (1,014 ) (2,027 ) (2,027 ) Net Income Available to Common Shareholders $ 8,802 $ 10,629 $ 11,868 $ 19,431 $ 23,117 Income Statement Net Interest Income Net interest income was $25.9 million for the second quarter of 2023, a decrease of $2.7 million, from $28.6 million in the first quarter of 2023, and a decrease of $6.7 million, from $32.5 million in the second quarter of 2022. The linked-quarter decrease in net interest income was primarily due to higher rates paid on deposits in the rising interest rate environment. The 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 $4.40 billion for the second quarter of 2023, an increase of $71.3 million, or 1.7%, from $4.32 billion for the first quarter of 2023, and an increase of $723.3 million, or 19.7%, from $3.67 billion for the second 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. Net interest margin (on a fully tax-equivalent basis) for the second quarter of 2023 was 2.40%, a 32 basis point decrease from 2.72% in the first quarter of 2023, and a 118 basis point decrease from 3.58% in the second quarter of 2022. Core net interest margin (on a fully tax-equivalent basis), a non-GAAP financial measure which excludes the impact of loan fees and PPP balances, interest, and fees, for the second quarter of 2023 was 2.31%, a 31 basis point decrease from 2.62% in the first quarter of 2023, and a 103 basis point decrease from 3.34% in the second quarter of 2022. The linked-quarter decline in the margin was primarily due to higher funding costs, offset partially by higher earning asset yields. The year-over-year decline in the margin 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 $55.0 million for the second quarter of 2023, an increase of $3.0 million, from $52.0 million in the first quarter of 2023, and an increase of $17.2 million, from $37.8 million in the second quarter of 2022. The yield on interest earning assets (on a fully tax-equivalent basis) was 5.06% in the second quarter of 2023, compared to 4.91% in the first quarter of 2023, and 4.16% in the second 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 and loans repricing at yields accretive to the existing portfolio. 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. 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 5.19% in the second quarter of 2023, which was 13 basis points higher than 5.06% in the first quarter of 2023, and 76 basis points higher than 4.43% in the second 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 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 Interest 5.09 % 4.95 % 4.74 % 4.42 % 4.17 % Fees 0.10 0.11 0.12 0.17 0.26 Yield on Loans, Excluding PPP Loans 5.19 % 5.06 % 4.86 % 4.59 % 4.43 % Interest expense was $29.1 million for the second quarter of 2023, an increase of $5.7 million, from $23.4 million in the first quarter of 2023, and an increase of $23.9 million, from $5.3 million in the second quarter of 2022. The cost of interest bearing liabilities increased 56 basis points on a linked-quarter basis from 3.03% in the first quarter of 2023 to 3.59% in the second quarter of 2023, primarily due to higher rates paid on deposits and increased utilization of FHLB advances in the rising interest rate environment. On a year-over-year basis, the cost of interest bearing liabilities increased 273 basis points from 0.86% in the second quarter of 2022 to 3.59% in the second 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 $23.0 million for the second quarter of 2023, an increase of $6.6 million, from $16.4 million in the first quarter of 2023, and an increase of $19.5 million, from $3.5 million in the second quarter of 2022. The cost of total deposits increased 65 basis points on a linked-quarter basis from 2.01% in the first quarter of 2023, to 2.66% in the second 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 220 basis points from 0.46% in the second quarter of 2022, to 2.66% in the second quarter of 2023, primarily due to 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 June 30, 2023, March 31, 2023, and June 30, 2022 is as follows: For the Three Months Ended June 30, 2023 March 31, 2023 June 30, 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 $ 59,963 $ 587 3.93 % $ 63,253 $ 447 2.86 % $ 61,046 $ 40 0.26 % Investment Securities: Taxable Investment Securities 568,143 6,000 4.24 574,242 5,958 4.21 417,142 2,696 2.59 Tax-Exempt Investment Securities (1) 27,081 300 4.44 29,803 330 4.49 74,261 795 4.30 Total Investment Securities 595,224 6,300 4.24 604,045 6,288 4.22 491,403 3,491 2.85 Paycheck Protection Program Loans (2) 913 2 1.00 999 2 1.00 8,335 263 12.67 Loans (1)(2) 3,715,621 48,064 5.19 3,629,447 45,263 5.06 3,099,344 34,205 4.43 Total Loans 3,716,534 48,066 5.19 3,630,446 45,265 5.06 3,107,679 34,468 4.45 Federal Home Loan Bank Stock 23,330 456 7.84 25,962 372 5.81 11,620 59 2.04 Total Interest Earning Assets 4,395,051 55,409 5.06 % 4,323,706 52,372 4.91 % 3,671,748 38,058 4.16 % Noninterest Earning Assets 88,611 81,528 71,827 Total Assets $ 4,483,662 $ 4,405,234 $ 3,743,575 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 683,034 $ 5,918 3.48 % $ 461,372 $ 2,780 2.44 % $ 552,502 $ 694 0.50 % Savings and Money Market Deposits 861,947 7,048 3.28 1,044,794 6,499 2.52 925,354 1,185 0.51 Time Deposits 269,439 1,702 2.53 248,174 1,069 1.75 280,645 665 0.95 Brokered Deposits 896,989 8,330 3.72 743,465 6,026 3.29 403,931 912 0.91 Total Interest Bearing Deposits 2,711,409 22,998 3.40 2,497,805 16,374 2.66 2,162,432 3,456 0.64 Federal Funds Purchased 210,677 2,761 5.26 415,111 4,944 4.83 137,379 410 1.20 Notes Payable 13,750 285 8.33 13,750 263 7.77 — — — FHLB Advances 242,714 2,092 3.46 128,222 861 2.72 47,511 167 1.41 Subordinated Debentures 79,041 993 5.04 78,945 983 5.05 92,396 1,219 5.29 Total Interest Bearing Liabilities 3,257,591 29,129 3.59 % 3,133,833 23,425 3.03 % 2,439,718 5,252 0.86 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 755,040 813,598 882,477 Other Noninterest Bearing Liabilities 64,684 54,270 39,932 Total Noninterest Bearing Liabilities 819,724 867,868 922,409 Shareholders' Equity 406,347 403,533 381,448 Total Liabilities and Shareholders' Equity $ 4,483,662 $ 4,405,234 $ 3,743,575 Net Interest Income / Interest Rate Spread 26,280 1.47 % 28,947 1.88 % 32,806 3.30 % Net Interest Margin (3) 2.40 % 2.72 % 3.58 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities and Loans (408 ) (380 ) (276 ) Net Interest Income $ 25,872 $ 28,567 $ 32,530 ______________________________ (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 The provision for credit losses on loans was $550,000 for the second quarter of 2023, compared to $1.5 million for the first quarter of 2023 and $3.0 million for the second quarter of 2022. The provision recorded in the second quarter of 2023 was primarily attributable to the growth of the loan portfolio. The allowance for credit losses on loans to total loans was 1.36% at June 30, 2023 and March 31, 2023, compared to 1.39% at June 30, 2022. The following table presents the activity in the Company’s allowance for credit losses on loans for the periods indicated: Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2023 2023 2022 2023 2022 Balance at Beginning of Period $ 50,148 $ 47,996 $ 41,692 $ 47,996 $ 40,020 Impact of Adopting CECL — 650 — 650 — Provision for Credit Losses 550 1,500 3,025 2,050 4,700 Charge-offs (3 ) (4 ) (14 ) (7 ) (29 ) Recoveries 6 6 8 12 20 Balance at End of Period $ 50,701 $ 50,148 $ 44,711 $ 50,701 $ 44,711 The provision for credit losses for off-balance sheet credit exposures was a negative provision of $500,000 for the second quarter of 2023, compared to a negative $875,000 for the first quarter of 2023 and zero for the second 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. The following table presents a summary of the activity in the provision for credit losses for the periods indicated: Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2023 2023 2022 2023 2022 Provision for Credit Losses on Loans $ 550 $ 1,500 $ 3,025 $ 2,050 $ 4,700 Provision for Credit Losses for Off-Balance Sheet Credit Exposures (500 ) (875 ) — (1,375 ) — Provision for Credit Losses $ 50 $ 625 $ 3,025 $ 675 $ 4,700 Noninterest Income Noninterest income was $1.4 million for the second quarter of 2023, a decrease of $528,000 from $1.9 million for the first quarter of 2023, and a decrease of $235,000 from $1.7 million for the second quarter of 2022. The linked-quarter decrease was primarily due to a decrease in letter of credit fees and FHLB prepayment income. The year-over-year decrease was primarily due to decreased letter of credit fees and other income, offset partially by an increase in customer service fees and bank-owned life insurance income. The following table presents the major components of noninterest income for the periods indicated: Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2023 2023 2022 2023 2022 Noninterest Income: Customer Service Fees $ 368 $ 349 $ 298 $ 717 $ 579 Net Gain (Loss) on Sales of Securities 50 (56 ) 52 (6 ) 52 Letter of Credit Fees 379 634 564 1,013 806 Debit Card Interchange Fees 155 138 152 293 285 Swap Fees — — — — 557 Bank-Owned Life Insurance 238 234 149 472 297 FHLB Prepayment Income — 299 — 299 — Other Income 225 345 435 570 631 Totals $ 1,415 $ 1,943 $ 1,650 $ 3,358 $ 3,207 Noninterest Expense Noninterest expense was $14.4 million for the second quarter of 2023, an increase of $205,000 from $14.2 million for the first quarter of 2023, and an increase of $636,000 from $13.8 million for the second quarter of 2022. The linked-quarter increase was primarily due to industry-wide increases in the FDIC insurance assessment, offset partially by a decrease in salaries and employee benefits resulting from lower discretionary incentive accruals and a decrease in occupancy and equipment. The year-over-year increase was primarily attributable to increases in the FDIC insurance assessment and derivative collateral fees, offset partially by decreases in salaries and employee benefits and marketing and advertising. The following table presents the major components of noninterest expense for the periods indicated: Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2023 2023 2022 2023 2022 Noninterest Expense: Salaries and Employee Benefits $ 8,589 $ 8,815 $ 8,977 $ 17,404 $ 17,671 Occupancy and Equipment 1,075 1,209 1,042 2,284 2,127 FDIC Insurance Assessment 900 665 330 1,565 690 Data Processing 401 357 356 758 653 Professional and Consulting Fees 829 755 742 1,584 1,436 Derivative Collateral Fees 404 380 27 784 29 Information Technology and Telecommunications 711 683 594 1,394 1,172 Marketing and Advertising 321 262 524 583 1,150 Intangible Asset Amortization 34 48 47 82 95 Amortization of Tax Credit Investments 114 114 63 228 180 Other Expense 1,010 895 1,050 1,905 2,057 Totals $ 14,388 $ 14,183 $ 13,752 $ 28,571 $ 27,260 The Company had 253 full-time equivalent employees at June 30, 2023, compared to 246 employees at March 31, 2023, and 236 employees at June 30, 2022. The efficiency ratio, a non-GAAP financial measure, was 52.7% for the second quarter of 2023, compared to 46.2% for the first quarter of 2023, and 40.2% for the second quarter of 2022. Income Taxes The effective combined federal and state income tax rate for the second quarter of 2023 was 23.6%, a decrease from 25.9% for the first quarter of 2023, and 26.0% for the second quarter of 2022. Balance Sheet Total assets at June 30, 2023 and March 31, 2023 were $4.60 billion, an 18.5% increase from $3.88 billion at June 30, 2022. 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 June 30, 2023 were $3.74 billion, an increase of $51.9 million, or 5.6% annualized, over total gross loans of $3.68 billion at March 31, 2023, and an increase of $510.3 million, or 15.8%, over total gross loans of $3.23 billion at June 30, 2022. The increase in the loan portfolio during the second quarter of 2023 was primarily due to the funding of existing construction and land development loans and growth in the 1-4 family mortgage segment, offset partially by a decrease in the 1-4 family construction segment. The following table presents the dollar composition of the Company’s loan portfolio, by category, at the dates indicated: June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 (dollars in thousands) Commercial $ 459,184 $ 454,193 $ 435,344 $ 412,448 $ 403,569 Paycheck Protection Program 877 963 1,049 1,192 4,860 Construction and Land Development 351,069 312,277 295,554 280,380 305,552 1 - 4 Family Construction 69,648 85,797 70,242 55,177 53,639 Real Estate Mortgage: 1 - 4 Family Mortgage 400,708 380,210 355,474 341,102 334,815 Multifamily 1,314,524 1,320,081 1,306,738 1,230,509 1,087,865 CRE Owner Occupied 159,088 158,650 149,905 151,088 142,214 CRE Nonowner Occupied 971,532 962,671 947,008 900,691 886,432 Total Real Estate Mortgage Loans 2,845,852 2,821,612 2,759,125 2,623,390 2,451,326 Consumer and Other 9,581 9,518 8,132 7,495 6,939 Total Loans, Gross 3,736,211 3,684,360 3,569,446 3,380,082 3,225,885 Allowance for Loan Losses (50,701 ) (50,148 ) (47,996 ) (46,491 ) (44,711 ) Net Deferred Loan Fees (7,718 ) (8,735 ) (9,293 ) (9,088 ) (9,536 ) Total Loans, Net $ 3,677,792 $ 3,625,477 $ 3,512,157 $ 3,324,503 $ 3,171,638 Total deposits at June 30, 2023 were $3.58 billion, an increase of $166.8 million, or 19.6% annualized, over total deposits of $3.41 billion at March 31, 2023, and an increase of $376.0 million, or 11.7%, over total deposits of $3.20 billion at June 30, 2022. Deposits increased in the second quarter of 2023 primarily due to inflows of core deposits, defined as deposits excluding brokered deposits and time deposits greater than $250,000, and brokered deposits. Brokered deposits continue to be used as a supplemental funding source, as needed, to support continued loan portfolio growth. Uninsured deposits as of June 30, 2023 were 22% of total deposits, down from 24% as of March 31, 2023. The following table presents the dollar composition of the Company’s deposit portfolio, by category, at the dates indicated: June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 (dollars in thousands) Noninterest Bearing Transaction Deposits $ 751,217 $ 742,198 $ 884,272 $ 961,084 $ 961,998 Interest Bearing Transaction Deposits 719,488 630,037 451,992 510,396 522,151 Savings and Money Market Deposits 860,613 913,013 1,031,873 1,077,333 952,138 Time Deposits 271,783 266,213 272,253 293,052 272,424 Brokered Deposits 974,831 859,662 776,153 463,209 493,242 Total Deposits $ 3,577,932 $ 3,411,123 $ 3,416,543 $ 3,305,074 $ 3,201,953 Capital Total shareholders’ equity at June 30, 2023 was $409.1 million, an increase of $7.1 million, or 1.8%, compared to total shareholders’ equity of $402.0 million at March 31, 2023, and an increase of $34.2 million, or 9.1%, over total shareholders’ equity of $374.9 million at June 30, 2022. The linked-quarter 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 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 the Current Expected Credit Losses (CECL) accounting methodology and preferred stock dividends. The Company did not purchase any shares of its common stock during the second quarter of 2023. Tangible book value per share, a non-GAAP financial measure, was $12.15 as of June 30, 2023, an increase of 1.7% from $11.95 as of March 31, 2023, and an increase of 10.1% from $11.03 as of June 30, 2022. The linked-quarter and year-over-year increases occurred despite the market value depreciation of the securities portfolio driven by the rising interest rate environment. Tangible common equity as a percentage of tangible assets, a non-GAAP financial measure, was 7.39% at June 30, 2023, compared to 7.23% at March 31, 2023, and 7.87% at June 30, 2022. Today, the Company also announced that its Board of Directors has 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 September 1, 2023 to shareholders of record of the Series A Preferred Stock at the close of business on August 15, 2023. Liquidity Total on- and off-balance sheet liquidity was $1.96 billion as of June 30, 2023, compared to $1.92 billion at March 31, 2023 and $1.53 billion at June 30, 2022. The Company did not utilize the Bank Term Funding Program (BTFP) or Federal Reserve Discount Window during the second quarter of 2023. Primary Liquidity—On-Balance Sheet June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 (dollars in thousands) Cash and Cash Equivalents $ 138,618 $ 177,116 $ 48,090 $ 36,332 $ 43,168 Securities Available for Sale 538,220 559,430 548,613 542,007 482,583 Less: Pledged Securities (236,206 ) (234,452 ) — — — Total Primary Liquidity $ 440,632 $ 502,094 $ 596,703 $ 578,339 $ 525,751 Ratio of Primary Liquidity to Total Deposits 12.3 % 14.7 % 17.5 % 17.5 % 16.4 % Secondary Liquidity—Off-Balance Sheet Borrowing Capacity Net Secured Borrowing Capacity with the FHLB $ 400,792 $ 246,795 $ 390,898 $ 426,604 $ 569,076 Net Secured Borrowing Capacity with the Federal Reserve Bank 986,644 990,685 157,827 156,534 169,766 Unsecured Borrowing Capacity with Correspondent Lenders 108,000 158,000 208,000 208,000 208,000 Secured Borrowing Capacity with Correspondent Lender 26,250 26,250 26,250 40,000 25,000 Total Secondary Liquidity 1,521,686 1,421,730 782,975 831,138 971,842 Total Primary and Secondary Liquidity $ 1,962,318 $ 1,923,824 $ 1,379,678 $ 1,409,477 $ 1,497,593 Ratio of Primary and Secondary Liquidity to Total Deposits 54.8 % 56.4 % 40.4 % 42.6 % 46.8 % Asset Quality Annualized net charge-offs (recoveries) as a percentage of average loans were 0.00% for the second quarter of 2023, first quarter of 2023 and second quarter of 2022. At June 30, 2023, the Company’s nonperforming assets, which include nonaccrual loans, loans past due 90 days and still accruing, and foreclosed assets, were $778,000, or 0.02% of total assets, as compared to $809,000, or 0.02% of total assets at March 31, 2023, and $688,000, or 0.02% of total assets at June 30, 2022. Loans that have potential weaknesses that warrant a watchlist risk rating at June 30, 2023 totaled $27.2 million, compared to $27.6 million at March 31, 2023, and $34.7 million at June 30, 2022. Loans that warranted a substandard risk rating at June 30, 2023 totaled $33.8 million, compared to $36.3 million at March 31, 2023, and $27.0 million at June 30, 2022. The linked-quarter decrease was primarily due to the upgrade of one loan relationship; however, increased uncertainty in the economic environment may result in future watchlist or adverse classifications in the loan portfolio. The following table presents a summary of asset quality measurements at the dates indicated: As of and for the Three Months Ended June 30, March 31, December 31 September 30, June 30, (dollars in thousands) 2023 2023 2022 2022 2022 Selected Asset Quality Data Loans 30-89 Days Past Due $ — $ 21 $ 186 $ 38 $ 225 Loans 30-89 Days Past Due to Total Loans 0.00 % 0.00 % 0.01 % 0.00 % 0.01 % Nonperforming Loans $ 662 $ 693 $ 639 $ 663 $ 688 Nonperforming Loans to Total Loans 0.02 % 0.02 % 0.02 % 0.02 % 0.02 % Foreclosed Assets $ 116 $ 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) $ 778 $ 809 $ 639 $ 663 $ 688 Nonperforming Assets to Total Assets (1) 0.02 % 0.02 % 0.01 % 0.02 % 0.02 % Allowance for Credit Losses to Total Loans 1.36 1.36 1.34 1.38 1.39 Allowance for Credit Losses to Nonaccrual Loans 7,658.76 7,236.36 7,511.11 7,012.22 6,498.69 Net Loan Charge-Offs (Recoveries) (Annualized) to Average Loans 0.00 0.00 0.00 (0.03 ) 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 second quarter 2023 financial results on Thursday, July 27, 2023 at 8:00 a.m. Central Time. The conference call can be accessed by dialing 844-481-2913 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 5127957. The replay will be available through August 3, 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 June 30, 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 and possible recession; 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) June 30, December 31, June 30, 2023 2022 2022 (Unaudited) (Unaudited) ASSETS Cash and Cash Equivalents $ 177,101 $ 87,043 $ 73,517 Bank-Owned Certificates of Deposit 1,225 1,181 1,138 Securities Available for Sale, at Fair Value 538,220 548,613 482,583 Loans, Net of Allowance for Credit Losses of $50,701 at June 30, 2023 (unaudited), $47,996 at December 31, 2022 and $44,711 at June 30, 2022 (unaudited) 3,677,792 3,512,157 3,171,638 Federal Home Loan Bank (FHLB) Stock, at Cost 21,557 19,606 9,921 Premises and Equipment, Net 49,710 48,445 49,294 Foreclosed Assets 116 — — Accrued Interest 13,822 13,479 10,010 Goodwill 2,626 2,626 2,626 Other Intangible Assets, Net 206 288 383 Bank-Owned Life Insurance 33,958 33,485 25,614 Other Assets 86,852 78,739 56,540 Total Assets $ 4,603,185 $ 4,345,662 $ 3,883,264 LIABILITIES AND EQUITY LIABILITIES Deposits: Noninterest Bearing $ 751,217 $ 884,272 $ 961,998 Interest Bearing 2,826,715 2,532,271 2,239,955 Total Deposits 3,577,932 3,416,543 3,201,953 Federal Funds Purchased 195,000 287,000 86,000 Notes Payable 13,750 13,750 — FHLB Advances 262,000 97,000 56,500 Subordinated Debentures, Net of Issuance Costs 79,096 78,905 92,459 Accrued Interest Payable 2,974 2,831 1,393 Other Liabilities 63,307 55,569 70,076 Total Liabilities 4,194,059 3,951,598 3,508,381 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 June 30, 2023 (unaudited), December 31, 2022, and June 30, 2022 (unaudited) 66,514 66,514 66,514 Common Stock- $0.01 par value; Authorized 75,000,000 Common Stock - Issued and Outstanding 27,973,995 at June 30, 2023 (unaudited), 27,751,950 at December 31, 2022 and 27,677,372 at June 30, 2022 (unaudited) 280 278 277 Additional Paid-In Capital 99,044 96,529 96,689 Retained Earnings 264,196 248,685 222,464 Accumulated Other Comprehensive Loss (20,908 ) (17,942 ) (11,061 ) Total Shareholders' Equity 409,126 394,064 374,883 Total Liabilities and Equity $ 4,603,185 $ 4,345,662 $ 3,883,264 Bridgewater Bancshares, Inc. and Subsidiaries Consolidated Statements of Income (dollars in thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2023 2023 2022 2023 2022 INTEREST INCOME Loans, Including Fees $ 47,721 $ 44,955 $ 34,358 $ 92,676 $ 66,102 Investment Securities 6,237 6,218 3,325 12,455 6,195 Other 1,043 819 99 1,862 179 Total Interest Income 55,001 51,992 37,782 106,993 72,476 INTEREST EXPENSE Deposits 22,998 16,374 3,456 39,372 6,614 Notes Payable 285 263 — 548 — FHLB Advances 2,092 861 167 2,953 317 Subordinated Debentures 993 983 1,219 1,976 2,416 Federal Funds Purchased 2,761 4,944 410 7,705 419 Total Interest Expense 29,129 23,425 5,252 52,554 9,766 NET INTEREST INCOME 25,872 28,567 32,530 54,439 62,710 Provision for Credit Losses 50 625 3,025 675 4,700 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 25,822 27,942 29,505 53,764 58,010 NONINTEREST INCOME Customer Service Fees 368 349 298 717 579 Net Gain (Loss) on Sales of Available for Sale Securities 50 (56 ) 52 (6 ) 52 Other Income 997 1,650 1,300 2,647 2,576 Total Noninterest Income 1,415 1,943 1,650 3,358 3,207 NONINTEREST EXPENSE Salaries and Employee Benefits 8,589 8,815 8,977 17,404 17,671 Occupancy and Equipment 1,075 1,209 1,042 2,284 2,127 Other Expense 4,724 4,159 3,733 8,883 7,462 Total Noninterest Expense 14,388 14,183 13,752 28,571 27,260 INCOME BEFORE INCOME TAXES 12,849 15,702 17,403 28,551 33,957 Provision for Income Taxes 3,033 4,060 4,521 7,093 8,813 NET INCOME 9,816 11,642 12,882 21,458 25,144 Preferred Stock Dividends (1,014 ) (1,013 ) (1,014 ) (2,027 ) (2,027 ) NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 8,802 $ 10,629 $ 11,868 $ 19,431 $ 23,117 EARNINGS PER SHARE Basic $ 0.32 $ 0.38 $ 0.43 $ 0.70 $ 0.83 Diluted 0.31 0.37 0.41 0.69 0.80 Bridgewater Bancshares, Inc. and Subsidiaries Analysis of Average Balances, Yields and Rates (dollars in thousands, except per share data) (Unaudited) For the Six Months Ended June 30, 2023 June 30, 2022 Average Interest Yield/ Average Interest Yield/ Balance & Fees Rate Balance & Fees Rate (dollars in thousands) Interest Earning Assets: Cash Investments $ 61,599 $ 1,034 3.38 % $ 70,718 $ 66 0.19 % Investment Securities: Taxable Investment Securities 571,176 11,958 4.22 395,203 4,951 2.53 Tax-Exempt Investment Securities (1) 28,435 629 4.46 72,933 1,574 4.35 Total Investment Securities 599,611 12,587 4.23 468,136 6,525 2.81 Paycheck Protection Program Loans (2) 956 5 1.00 13,210 826 12.61 Loans (1)(2) 3,672,772 93,327 5.12 2,991,195 65,480 4.41 Total Loans 3,673,728 93,332 5.12 3,004,405 66,306 4.45 Federal Home Loan Bank Stock 24,639 828 6.77 8,667 113 2.63 Total Interest Earning Assets 4,359,577 107,781 4.99 % 3,551,926 73,010 4.15 % Noninterest Earning Assets 85,087 77,395 Total Assets $ 4,444,664 $ 3,629,321 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 570,964 $ 8,698 3.07 % $ 559,352 $ 1,291 0.47 % Savings and Money Market Deposits 952,865 13,547 2.87 901,102 2,103 0.47 Time Deposits 258,865 2,771 2.16 284,757 1,410 1.00 Brokered Deposits 820,651 14,356 3.53 405,282 1,810 0.90 Total Interest Bearing Deposits 2,603,345 39,372 3.05 2,150,493 6,614 0.62 Federal Funds Purchased 312,329 7,705 4.97 74,340 419 1.14 Notes Payable 13,750 548 8.03 — — — FHLB Advances 185,785 2,953 3.21 45,019 317 1.42 Subordinated Debentures 78,994 1,976 5.05 92,341 2,416 5.28 Total Interest Bearing Liabilities 3,194,203 52,554 3.32 % 2,362,193 9,766 0.83 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 786,009 852,648 Other Noninterest Bearing Liabilities 59,504 32,248 Total Noninterest Bearing Liabilities 845,513 884,896 Shareholders' Equity 404,948 382,232 Total Liabilities and Shareholders' Equity $ 4,444,664 $ 3,629,321 Net Interest Income / Interest Rate Spread 55,227 1.67 % 63,244 3.32 % Net Interest Margin (3) 2.55 % 3.59 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities and Loans (788 ) (534 ) Net Interest Income $ 54,439 $ 62,710 ______________________________ (1) Interest income and average rates for tax-exempt investment securities and loans are presented on a tax-equivalent basis, assuming a statutory federal income tax rate of 21%. (2) Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs. (3) Net interest margin includes the tax equivalent adjustment and represents the annualized results of: (i) the difference between interest income on interest earning assets and the interest expense on interest bearing liabilities, divided by (ii) average interest earning assets for the period. Bridgewater Bancshares, Inc. and Subsidiaries Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended For the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2023 2023 2022 2023 2022 Pre-Provision Net Revenue Noninterest Income $ 1,415 $ 1,943 $ 1,650 $ 3,358 $ 3,207 Less: (Gain) Loss on Sales of Securities (50 ) 56 (52 ) 6 (52 ) Less: FHLB Advance Prepayment Income — (299 ) — (299 ) — Total Operating Noninterest Income 1,365 1,700 1,598 3,065 3,155 Plus: Net Interest Income 25,872 28,567 32,530 54,439 62,710 Net Operating Revenue $ 27,237 $ 30,267 $ 34,128 $ 57,504 $ 65,865 Noninterest Expense $ 14,388 $ 14,183 $ 13,752 $ 28,571 $ 27,260 Less: Amortization of Tax Credit Investments (114 ) (114 ) (63 ) (228 ) (180 ) Total Operating Noninterest Expense $ 14,274 $ 14,069 $ 13,689 $ 28,343 $ 27,080 Pre-Provision Net Revenue $ 12,963 $ 16,198 $ 20,439 $ 29,161 $ 38,785 Plus: Non-Operating Revenue Adjustments 50 243 52 293 52 Less: Provision for Credit Losses 50 625 3,025 675 4,700 Non-Operating Expense Adjustments 114 114 63 228 180 Provision for Income Taxes 3,033 4,060 4,521 7,093 8,813 Net Income $ 9,816 $ 11,642 $ 12,882 $ 21,458 $ 25,144 Average Assets $ 4,483,662 $ 4,405,234 $ 3,743,575 $ 4,444,664 $ 3,629,321 Pre-Provision Net Revenue Return on Average Assets 1.16 % 1.49 % 2.19 % 1.32 % 2.16 % As of and for the Three Months Ended As of and for the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2023 2023 2022 2023 2022 Core Net Interest Margin Net Interest Income (Tax-Equivalent Basis) $ 26,280 $ 28,947 $ 32,806 $ 55,227 $ 63,244 Less: Loan Fees (941 ) (998 ) (2,030 ) (1,939 ) (3,773 ) Less: PPP Interest and Fees (3 ) (2 ) (263 ) (5 ) (826 ) Core Net Interest Income $ 25,336 $ 27,947 $ 30,513 $ 53,283 $ 58,645 Average Interest Earning Assets $ 4,395,050 $ 4,323,706 $ 3,671,748 $ 4,359,576 $ 3,551,926 Less: Average PPP Loans (913 ) (999 ) (8,335 ) (956 ) (13,210 ) Core Average Interest Earning Assets $ 4,394,137 $ 4,322,707 $ 3,663,413 $ 4,358,620 $ 3,538,716 Core Net Interest Margin 2.31 % 2.62 % 3.34 % 2.47 % 3.34 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended For the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2023 2023 2022 2023 2022 Efficiency Ratio Noninterest Expense $ 14,388 $ 14,183 $ 13,752 $ 28,571 $ 27,260 Less: Amortization of Intangible Assets (34 ) (48 ) (47 ) (82 ) (95 ) Adjusted Noninterest Expense $ 14,354 $ 14,135 $ 13,705 $ 28,489 $ 27,165 Net Interest Income 25,872 28,567 32,530 54,439 62,710 Noninterest Income 1,415 1,943 1,650 3,358 3,207 Less: (Gain) Loss on Sales of Securities (50 ) 56 (52 ) 6 (52 ) Adjusted Operating Revenue $ 27,237 $ 30,566 $ 34,128 $ 57,803 $ 65,865 Efficiency Ratio 52.7 % 46.2 % 40.2 % 49.3 % 41.2 % As of and for the Three Months Ended As of and for the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2023 2023 2022 2023 2022 Tangible Common Equity and Tangible Common Equity/Tangible Assets Total Shareholders' Equity $ 409,126 $ 402,006 $ 374,883 Less: Preferred Stock (66,514 ) (66,514 ) (66,514 ) Total Common Shareholders' Equity 342,612 335,492 308,369 Less: Intangible Assets (2,832 ) (2,866 ) (3,009 ) Tangible Common Equity $ 339,780 $ 332,626 $ 305,360 Total Assets $ 4,603,185 $ 4,602,899 $ 3,883,264 Less: Intangible Assets (2,832 ) (2,866 ) (3,009 ) Tangible Assets $ 4,600,353 $ 4,600,033 $ 3,880,255 Tangible Common Equity/Tangible Assets 7.39 % 7.23 % 7.87 % Tangible Book Value Per Share Book Value Per Common Share $ 12.25 $ 12.05 $ 11.14 Less: Effects of Intangible Assets (0.10 ) (0.10 ) (0.11 ) Tangible Book Value Per Common Share $ 12.15 $ 11.95 $ 11.03 Return on Average Tangible Common Equity Net Income Available to Common Shareholders $ 8,802 $ 10,629 $ 11,868 $ 19,431 $ 23,117 Average Shareholders' Equity $ 406,347 $ 403,533 $ 381,448 $ 404,948 $ 382,232 Less: Average Preferred Stock (66,514 ) (66,514 ) (66,514 ) (66,514 ) (66,514 ) Average Common Equity 339,833 337,019 314,934 338,434 315,718 Less: Effects of Average Intangible Assets (2,846 ) (2,894 ) (3,037 ) (2,870 ) (3,060 ) Average Tangible Common Equity $ 336,987 $ 334,125 $ 311,897 $ 335,564 $ 312,658 Return on Average Tangible Common Equity 10.48 % 12.90 % 15.26 % 11.68 % 14.91 % Three Months Ended June 30, March 31, December 31, September 30, June 30, 2023 2023 2022 2022 2022 Tangible Common Equity Total Shareholders' Equity $ 409,126 $ 402,006 $ 394,064 $ 382,007 $ 374,883 Less: Preferred Stock (66,514 ) (66,514 ) (66,514 ) (66,514 ) (66,514 ) Common Shareholders' Equity 342,612 335,492 327,550 315,493 308,369 Less: Intangible Assets (2,832 ) (2,866 ) (2,914 ) (2,962 ) (3,009 ) Tangible Common Equity $ 339,780 $ 332,626 $ 324,636 $ 312,531 $ 305,360 View source version on businesswire.com: https://www.businesswire.com/news/home/20230725009497/en/Contacts Media Contact: Jessica Stejskal | SVP Marketing Jessica.stejskal@bwbmn.com | 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Bridgewater Bancshares, Inc. Announces Second Quarter 2023 Net Income of $9.8 Million, $0.31 Diluted Earnings Per Common Share By: Bridgewater Bancshares, Inc. via Business Wire July 26, 2023 at 16:15 PM EDT Second Quarter 2023 Highlights Annualized return on average assets (ROA) of 0.88%, compared to 1.07% for the first quarter of 2023. Annualized return on average shareholders’ equity (ROE) of 9.69%, compared to 11.70% for the first quarter of 2023, and annualized return on average tangible common equity (ROATCE)(1) of 10.48%, compared to 12.90% for the first quarter of 2023. Gross loans increased $51.9 million, or 5.6% annualized, from the first quarter of 2023. Deposits increased by $166.8 million, or 19.6% annualized, from the first quarter of 2023, including an increase of core deposits(2) of $45.3 million, or 7.4% annualized. Total borrowing capacity of $1.5 billion at June 30, 2023, compared to $783.0 million at December 31, 2022. Net interest margin (on a fully tax-equivalent basis) of 2.40%, compared to 2.72% in the first quarter of 2023. Efficiency ratio(1) of 52.7%, compared to 46.2% for the first quarter of 2023. Noninterest expense increased slightly by $205,000, or 1.4%, from the first quarter of 2023, with annualized noninterest expense to average assets of 1.29%, compared to 1.31% for the first quarter of 2023. A credit loss provision of $550,000 was recorded to support continued loan growth, with allowance for credit losses to total loans of 1.36% at both June 30, 2023 and March 31, 2023. Annualized net loan charge-offs (recoveries) as a percentage of average loans of 0.00% for the second quarter of 2023, in-line with the first quarter of 2023. Nonperforming assets to total assets of 0.02% at June 30, 2023 and March 31, 2023. Tangible book value per share(1) of $12.15 at June 30, 2023, an increase of $0.20, or 6.7% annualized, compared to $11.95 at March 31, 2023. (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. (2) Core deposits are defined as total deposits less brokered deposits and certificates of deposit greater than $250,000. Bridgewater Bancshares, Inc. (Nasdaq: BWB) (the Company), the parent company of Bridgewater Bank (the Bank), today announced net income of $9.8 million for the second quarter of 2023, compared to $11.6 million for the first quarter of 2023, and $12.9 million for the second quarter of 2022. Earnings per diluted common share for the second quarter of 2023 were $0.31, compared to $0.37 per diluted common share for the first quarter of 2023, and $0.41 per diluted common share for the same period in 2022. “Bridgewater’s second quarter results were highlighted by several improving financial trends as we continue to manage the business through a challenging banking environment,” said Chairman, Chief Executive Officer, and President, Jerry Baack. “The overall composition of our balance sheet improved with a strong inflow of deposits, including growth in core deposits, and a reduction in overall borrowings. While our net interest margin remained under pressure, we saw the pace of compression slow noticeably on a month-to-month basis during the quarter. In addition, noninterest expense was again well controlled and asset quality remained superb.” “During the quarter, our teams maintained their focus on supporting and growing our client base, both by proactively engaging with our existing clients and cultivating new relationships across the Twin Cities market. In July, we also relocated our downtown Minneapolis branch to an enhanced location with more space to better serve our clients. We believe our proven ability to develop strong client relationships, combined with encouraging financial trends, will continue to drive success moving forward.” Key Financial Measures As of and for the Three Months Ended As of and for the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2023 2023 2022 2023 2022 Per Common Share Data Basic Earnings Per Share $ 0.32 $ 0.38 $ 0.43 $ 0.70 $ 0.83 Diluted Earnings Per Share 0.31 0.37 0.41 0.69 0.80 Book Value Per Share 12.25 12.05 11.14 12.25 11.14 Tangible Book Value Per Share (1) 12.15 11.95 11.03 12.15 11.03 Basic Weighted Average Shares Outstanding 27,886,425 27,726,894 27,839,260 27,807,100 27,980,749 Diluted Weighted Average Shares Outstanding 28,198,739 28,490,046 28,803,842 28,350,705 28,991,780 Shares Outstanding at Period End 27,973,995 27,845,244 27,677,372 27,973,995 27,677,372 Selected Performance Ratios Return on Average Assets (Annualized) 0.88 % 1.07 % 1.38 % 0.97 % 1.40 % Pre-Provision Net Revenue Return on Average Assets (Annualized) (1) 1.16 1.49 2.19 1.32 2.16 Return on Average Shareholders' Equity (Annualized) 9.69 11.70 13.55 10.69 13.27 Return on Average Tangible Common Equity (Annualized) (1) 10.48 12.90 15.26 11.68 14.91 Yield on Interest Earning Assets (2) 5.06 4.91 4.16 4.99 4.15 Yield on Total Loans, Gross (2) 5.19 5.06 4.45 5.12 4.45 Cost of Total Deposits 2.66 2.01 0.46 2.34 0.44 Cost of Funds 2.91 2.41 0.63 2.66 0.61 Net Interest Margin (2) 2.40 2.72 3.58 2.55 3.59 Core Net Interest Margin (1)(2) 2.31 2.62 3.34 2.47 3.34 Efficiency Ratio (1) 52.7 46.2 40.2 49.3 41.2 Noninterest Expense to Average Assets (Annualized) 1.29 1.31 1.47 1.30 1.51 Loan to Deposit Ratio 104.4 108.0 100.7 Core Deposits to Total Deposits (3) 70.3 72.4 82.9 Tangible Common Equity to Tangible Assets (1) 7.39 7.23 7.87 Capital Ratios (Bank Only) (4) Tier 1 Leverage Ratio 10.69 % 10.61 % 11.43 % Common Equity Tier 1 Risk-based Capital Ratio 11.66 11.37 11.53 Tier 1 Risk-based Capital Ratio 11.66 11.37 11.53 Total Risk-based Capital Ratio 12.91 12.62 12.74 Capital Ratios (Consolidated) (4) Tier 1 Leverage Ratio 9.47 % 9.41 % 10.33 % Common Equity Tier 1 Risk-based Capital Ratio 8.72 8.48 8.50 Tier 1 Risk-based Capital Ratio 10.33 10.08 10.29 Total Risk-based Capital Ratio 13.50 13.25 13.98 ______________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. (2) Amounts calculated on a tax-equivalent basis using the statutory federal tax rate of 21%. (3) Core deposits are defined as total deposits less brokered deposits and certificates of deposit greater than $250,000. (4) Preliminary data. Current period subject to change prior to filings with applicable regulatory agencies. Selected Financial Data June 30, March 31, December 31, September 30, June 30, (dollars in thousands) 2023 2023 2022 2022 2022 Selected Balance Sheet Data Total Assets $ 4,603,185 $ 4,602,899 $ 4,345,662 $ 4,128,987 $ 3,883,264 Total Loans, Gross 3,736,211 3,684,360 3,569,446 3,380,082 3,225,885 Allowance for Credit Losses 50,701 50,148 47,996 46,491 44,711 Goodwill and Other Intangibles 2,832 2,866 2,914 2,962 3,009 Deposits 3,577,932 3,411,123 3,416,543 3,305,074 3,201,953 Tangible Common Equity (1) 339,780 332,626 324,636 312,531 305,360 Total Shareholders' Equity 409,126 402,006 394,064 382,007 374,883 Average Total Assets - Quarter-to-Date 4,483,662 4,405,234 4,251,345 3,948,201 3,743,575 Average Shareholders' Equity - Quarter-to-Date 406,347 403,533 387,589 384,020 381,448 ______________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. For the Three Months Ended For the Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2023 2023 2022 2023 2022 Selected Income Statement Data Interest Income $ 55,001 $ 51,992 $ 37,782 $ 106,993 $ 72,476 Interest Expense 29,129 23,425 5,252 52,554 9,766 Net Interest Income 25,872 28,567 32,530 54,439 62,710 Provision for Credit Losses 50 625 3,025 675 4,700 Net Interest Income after Provision for Credit Losses 25,822 27,942 29,505 53,764 58,010 Noninterest Income 1,415 1,943 1,650 3,358 3,207 Noninterest Expense 14,388 14,183 13,752 28,571 27,260 Income Before Income Taxes 12,849 15,702 17,403 28,551 33,957 Provision for Income Taxes 3,033 4,060 4,521 7,093 8,813 Net Income 9,816 11,642 12,882 21,458 25,144 Preferred Stock Dividends (1,014 ) (1,013 ) (1,014 ) (2,027 ) (2,027 ) Net Income Available to Common Shareholders $ 8,802 $ 10,629 $ 11,868 $ 19,431 $ 23,117 Income Statement Net Interest Income Net interest income was $25.9 million for the second quarter of 2023, a decrease of $2.7 million, from $28.6 million in the first quarter of 2023, and a decrease of $6.7 million, from $32.5 million in the second quarter of 2022. The linked-quarter decrease in net interest income was primarily due to higher rates paid on deposits in the rising interest rate environment. The 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 $4.40 billion for the second quarter of 2023, an increase of $71.3 million, or 1.7%, from $4.32 billion for the first quarter of 2023, and an increase of $723.3 million, or 19.7%, from $3.67 billion for the second 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. Net interest margin (on a fully tax-equivalent basis) for the second quarter of 2023 was 2.40%, a 32 basis point decrease from 2.72% in the first quarter of 2023, and a 118 basis point decrease from 3.58% in the second quarter of 2022. Core net interest margin (on a fully tax-equivalent basis), a non-GAAP financial measure which excludes the impact of loan fees and PPP balances, interest, and fees, for the second quarter of 2023 was 2.31%, a 31 basis point decrease from 2.62% in the first quarter of 2023, and a 103 basis point decrease from 3.34% in the second quarter of 2022. The linked-quarter decline in the margin was primarily due to higher funding costs, offset partially by higher earning asset yields. The year-over-year decline in the margin 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 $55.0 million for the second quarter of 2023, an increase of $3.0 million, from $52.0 million in the first quarter of 2023, and an increase of $17.2 million, from $37.8 million in the second quarter of 2022. The yield on interest earning assets (on a fully tax-equivalent basis) was 5.06% in the second quarter of 2023, compared to 4.91% in the first quarter of 2023, and 4.16% in the second 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 and loans repricing at yields accretive to the existing portfolio. 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. 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 5.19% in the second quarter of 2023, which was 13 basis points higher than 5.06% in the first quarter of 2023, and 76 basis points higher than 4.43% in the second 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 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 Interest 5.09 % 4.95 % 4.74 % 4.42 % 4.17 % Fees 0.10 0.11 0.12 0.17 0.26 Yield on Loans, Excluding PPP Loans 5.19 % 5.06 % 4.86 % 4.59 % 4.43 % Interest expense was $29.1 million for the second quarter of 2023, an increase of $5.7 million, from $23.4 million in the first quarter of 2023, and an increase of $23.9 million, from $5.3 million in the second quarter of 2022. The cost of interest bearing liabilities increased 56 basis points on a linked-quarter basis from 3.03% in the first quarter of 2023 to 3.59% in the second quarter of 2023, primarily due to higher rates paid on deposits and increased utilization of FHLB advances in the rising interest rate environment. On a year-over-year basis, the cost of interest bearing liabilities increased 273 basis points from 0.86% in the second quarter of 2022 to 3.59% in the second 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 $23.0 million for the second quarter of 2023, an increase of $6.6 million, from $16.4 million in the first quarter of 2023, and an increase of $19.5 million, from $3.5 million in the second quarter of 2022. The cost of total deposits increased 65 basis points on a linked-quarter basis from 2.01% in the first quarter of 2023, to 2.66% in the second 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 220 basis points from 0.46% in the second quarter of 2022, to 2.66% in the second quarter of 2023, primarily due to 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 June 30, 2023, March 31, 2023, and June 30, 2022 is as follows: For the Three Months Ended June 30, 2023 March 31, 2023 June 30, 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 $ 59,963 $ 587 3.93 % $ 63,253 $ 447 2.86 % $ 61,046 $ 40 0.26 % Investment Securities: Taxable Investment Securities 568,143 6,000 4.24 574,242 5,958 4.21 417,142 2,696 2.59 Tax-Exempt Investment Securities (1) 27,081 300 4.44 29,803 330 4.49 74,261 795 4.30 Total Investment Securities 595,224 6,300 4.24 604,045 6,288 4.22 491,403 3,491 2.85 Paycheck Protection Program Loans (2) 913 2 1.00 999 2 1.00 8,335 263 12.67 Loans (1)(2) 3,715,621 48,064 5.19 3,629,447 45,263 5.06 3,099,344 34,205 4.43 Total Loans 3,716,534 48,066 5.19 3,630,446 45,265 5.06 3,107,679 34,468 4.45 Federal Home Loan Bank Stock 23,330 456 7.84 25,962 372 5.81 11,620 59 2.04 Total Interest Earning Assets 4,395,051 55,409 5.06 % 4,323,706 52,372 4.91 % 3,671,748 38,058 4.16 % Noninterest Earning Assets 88,611 81,528 71,827 Total Assets $ 4,483,662 $ 4,405,234 $ 3,743,575 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 683,034 $ 5,918 3.48 % $ 461,372 $ 2,780 2.44 % $ 552,502 $ 694 0.50 % Savings and Money Market Deposits 861,947 7,048 3.28 1,044,794 6,499 2.52 925,354 1,185 0.51 Time Deposits 269,439 1,702 2.53 248,174 1,069 1.75 280,645 665 0.95 Brokered Deposits 896,989 8,330 3.72 743,465 6,026 3.29 403,931 912 0.91 Total Interest Bearing Deposits 2,711,409 22,998 3.40 2,497,805 16,374 2.66 2,162,432 3,456 0.64 Federal Funds Purchased 210,677 2,761 5.26 415,111 4,944 4.83 137,379 410 1.20 Notes Payable 13,750 285 8.33 13,750 263 7.77 — — — FHLB Advances 242,714 2,092 3.46 128,222 861 2.72 47,511 167 1.41 Subordinated Debentures 79,041 993 5.04 78,945 983 5.05 92,396 1,219 5.29 Total Interest Bearing Liabilities 3,257,591 29,129 3.59 % 3,133,833 23,425 3.03 % 2,439,718 5,252 0.86 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 755,040 813,598 882,477 Other Noninterest Bearing Liabilities 64,684 54,270 39,932 Total Noninterest Bearing Liabilities 819,724 867,868 922,409 Shareholders' Equity 406,347 403,533 381,448 Total Liabilities and Shareholders' Equity $ 4,483,662 $ 4,405,234 $ 3,743,575 Net Interest Income / Interest Rate Spread 26,280 1.47 % 28,947 1.88 % 32,806 3.30 % Net Interest Margin (3) 2.40 % 2.72 % 3.58 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities and Loans (408 ) (380 ) (276 ) Net Interest Income $ 25,872 $ 28,567 $ 32,530 ______________________________ (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 The provision for credit losses on loans was $550,000 for the second quarter of 2023, compared to $1.5 million for the first quarter of 2023 and $3.0 million for the second quarter of 2022. The provision recorded in the second quarter of 2023 was primarily attributable to the growth of the loan portfolio. The allowance for credit losses on loans to total loans was 1.36% at June 30, 2023 and March 31, 2023, compared to 1.39% at June 30, 2022. The following table presents the activity in the Company’s allowance for credit losses on loans for the periods indicated: Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2023 2023 2022 2023 2022 Balance at Beginning of Period $ 50,148 $ 47,996 $ 41,692 $ 47,996 $ 40,020 Impact of Adopting CECL — 650 — 650 — Provision for Credit Losses 550 1,500 3,025 2,050 4,700 Charge-offs (3 ) (4 ) (14 ) (7 ) (29 ) Recoveries 6 6 8 12 20 Balance at End of Period $ 50,701 $ 50,148 $ 44,711 $ 50,701 $ 44,711 The provision for credit losses for off-balance sheet credit exposures was a negative provision of $500,000 for the second quarter of 2023, compared to a negative $875,000 for the first quarter of 2023 and zero for the second 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. The following table presents a summary of the activity in the provision for credit losses for the periods indicated: Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2023 2023 2022 2023 2022 Provision for Credit Losses on Loans $ 550 $ 1,500 $ 3,025 $ 2,050 $ 4,700 Provision for Credit Losses for Off-Balance Sheet Credit Exposures (500 ) (875 ) — (1,375 ) — Provision for Credit Losses $ 50 $ 625 $ 3,025 $ 675 $ 4,700 Noninterest Income Noninterest income was $1.4 million for the second quarter of 2023, a decrease of $528,000 from $1.9 million for the first quarter of 2023, and a decrease of $235,000 from $1.7 million for the second quarter of 2022. The linked-quarter decrease was primarily due to a decrease in letter of credit fees and FHLB prepayment income. The year-over-year decrease was primarily due to decreased letter of credit fees and other income, offset partially by an increase in customer service fees and bank-owned life insurance income. The following table presents the major components of noninterest income for the periods indicated: Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2023 2023 2022 2023 2022 Noninterest Income: Customer Service Fees $ 368 $ 349 $ 298 $ 717 $ 579 Net Gain (Loss) on Sales of Securities 50 (56 ) 52 (6 ) 52 Letter of Credit Fees 379 634 564 1,013 806 Debit Card Interchange Fees 155 138 152 293 285 Swap Fees — — — — 557 Bank-Owned Life Insurance 238 234 149 472 297 FHLB Prepayment Income — 299 — 299 — Other Income 225 345 435 570 631 Totals $ 1,415 $ 1,943 $ 1,650 $ 3,358 $ 3,207 Noninterest Expense Noninterest expense was $14.4 million for the second quarter of 2023, an increase of $205,000 from $14.2 million for the first quarter of 2023, and an increase of $636,000 from $13.8 million for the second quarter of 2022. The linked-quarter increase was primarily due to industry-wide increases in the FDIC insurance assessment, offset partially by a decrease in salaries and employee benefits resulting from lower discretionary incentive accruals and a decrease in occupancy and equipment. The year-over-year increase was primarily attributable to increases in the FDIC insurance assessment and derivative collateral fees, offset partially by decreases in salaries and employee benefits and marketing and advertising. The following table presents the major components of noninterest expense for the periods indicated: Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2023 2023 2022 2023 2022 Noninterest Expense: Salaries and Employee Benefits $ 8,589 $ 8,815 $ 8,977 $ 17,404 $ 17,671 Occupancy and Equipment 1,075 1,209 1,042 2,284 2,127 FDIC Insurance Assessment 900 665 330 1,565 690 Data Processing 401 357 356 758 653 Professional and Consulting Fees 829 755 742 1,584 1,436 Derivative Collateral Fees 404 380 27 784 29 Information Technology and Telecommunications 711 683 594 1,394 1,172 Marketing and Advertising 321 262 524 583 1,150 Intangible Asset Amortization 34 48 47 82 95 Amortization of Tax Credit Investments 114 114 63 228 180 Other Expense 1,010 895 1,050 1,905 2,057 Totals $ 14,388 $ 14,183 $ 13,752 $ 28,571 $ 27,260 The Company had 253 full-time equivalent employees at June 30, 2023, compared to 246 employees at March 31, 2023, and 236 employees at June 30, 2022. The efficiency ratio, a non-GAAP financial measure, was 52.7% for the second quarter of 2023, compared to 46.2% for the first quarter of 2023, and 40.2% for the second quarter of 2022. Income Taxes The effective combined federal and state income tax rate for the second quarter of 2023 was 23.6%, a decrease from 25.9% for the first quarter of 2023, and 26.0% for the second quarter of 2022. Balance Sheet Total assets at June 30, 2023 and March 31, 2023 were $4.60 billion, an 18.5% increase from $3.88 billion at June 30, 2022. 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 June 30, 2023 were $3.74 billion, an increase of $51.9 million, or 5.6% annualized, over total gross loans of $3.68 billion at March 31, 2023, and an increase of $510.3 million, or 15.8%, over total gross loans of $3.23 billion at June 30, 2022. The increase in the loan portfolio during the second quarter of 2023 was primarily due to the funding of existing construction and land development loans and growth in the 1-4 family mortgage segment, offset partially by a decrease in the 1-4 family construction segment. The following table presents the dollar composition of the Company’s loan portfolio, by category, at the dates indicated: June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 (dollars in thousands) Commercial $ 459,184 $ 454,193 $ 435,344 $ 412,448 $ 403,569 Paycheck Protection Program 877 963 1,049 1,192 4,860 Construction and Land Development 351,069 312,277 295,554 280,380 305,552 1 - 4 Family Construction 69,648 85,797 70,242 55,177 53,639 Real Estate Mortgage: 1 - 4 Family Mortgage 400,708 380,210 355,474 341,102 334,815 Multifamily 1,314,524 1,320,081 1,306,738 1,230,509 1,087,865 CRE Owner Occupied 159,088 158,650 149,905 151,088 142,214 CRE Nonowner Occupied 971,532 962,671 947,008 900,691 886,432 Total Real Estate Mortgage Loans 2,845,852 2,821,612 2,759,125 2,623,390 2,451,326 Consumer and Other 9,581 9,518 8,132 7,495 6,939 Total Loans, Gross 3,736,211 3,684,360 3,569,446 3,380,082 3,225,885 Allowance for Loan Losses (50,701 ) (50,148 ) (47,996 ) (46,491 ) (44,711 ) Net Deferred Loan Fees (7,718 ) (8,735 ) (9,293 ) (9,088 ) (9,536 ) Total Loans, Net $ 3,677,792 $ 3,625,477 $ 3,512,157 $ 3,324,503 $ 3,171,638 Total deposits at June 30, 2023 were $3.58 billion, an increase of $166.8 million, or 19.6% annualized, over total deposits of $3.41 billion at March 31, 2023, and an increase of $376.0 million, or 11.7%, over total deposits of $3.20 billion at June 30, 2022. Deposits increased in the second quarter of 2023 primarily due to inflows of core deposits, defined as deposits excluding brokered deposits and time deposits greater than $250,000, and brokered deposits. Brokered deposits continue to be used as a supplemental funding source, as needed, to support continued loan portfolio growth. Uninsured deposits as of June 30, 2023 were 22% of total deposits, down from 24% as of March 31, 2023. The following table presents the dollar composition of the Company’s deposit portfolio, by category, at the dates indicated: June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 (dollars in thousands) Noninterest Bearing Transaction Deposits $ 751,217 $ 742,198 $ 884,272 $ 961,084 $ 961,998 Interest Bearing Transaction Deposits 719,488 630,037 451,992 510,396 522,151 Savings and Money Market Deposits 860,613 913,013 1,031,873 1,077,333 952,138 Time Deposits 271,783 266,213 272,253 293,052 272,424 Brokered Deposits 974,831 859,662 776,153 463,209 493,242 Total Deposits $ 3,577,932 $ 3,411,123 $ 3,416,543 $ 3,305,074 $ 3,201,953 Capital Total shareholders’ equity at June 30, 2023 was $409.1 million, an increase of $7.1 million, or 1.8%, compared to total shareholders’ equity of $402.0 million at March 31, 2023, and an increase of $34.2 million, or 9.1%, over total shareholders’ equity of $374.9 million at June 30, 2022. The linked-quarter 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 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 the Current Expected Credit Losses (CECL) accounting methodology and preferred stock dividends. The Company did not purchase any shares of its common stock during the second quarter of 2023. Tangible book value per share, a non-GAAP financial measure, was $12.15 as of June 30, 2023, an increase of 1.7% from $11.95 as of March 31, 2023, and an increase of 10.1% from $11.03 as of June 30, 2022. The linked-quarter and year-over-year increases occurred despite the market value depreciation of the securities portfolio driven by the rising interest rate environment. Tangible common equity as a percentage of tangible assets, a non-GAAP financial measure, was 7.39% at June 30, 2023, compared to 7.23% at March 31, 2023, and 7.87% at June 30, 2022. Today, the Company also announced that its Board of Directors has 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 September 1, 2023 to shareholders of record of the Series A Preferred Stock at the close of business on August 15, 2023. Liquidity Total on- and off-balance sheet liquidity was $1.96 billion as of June 30, 2023, compared to $1.92 billion at March 31, 2023 and $1.53 billion at June 30, 2022. The Company did not utilize the Bank Term Funding Program (BTFP) or Federal Reserve Discount Window during the second quarter of 2023. Primary Liquidity—On-Balance Sheet June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 (dollars in thousands) Cash and Cash Equivalents $ 138,618 $ 177,116 $ 48,090 $ 36,332 $ 43,168 Securities Available for Sale 538,220 559,430 548,613 542,007 482,583 Less: Pledged Securities (236,206 ) (234,452 ) — — — Total Primary Liquidity $ 440,632 $ 502,094 $ 596,703 $ 578,339 $ 525,751 Ratio of Primary Liquidity to Total Deposits 12.3 % 14.7 % 17.5 % 17.5 % 16.4 % Secondary Liquidity—Off-Balance Sheet Borrowing Capacity Net Secured Borrowing Capacity with the FHLB $ 400,792 $ 246,795 $ 390,898 $ 426,604 $ 569,076 Net Secured Borrowing Capacity with the Federal Reserve Bank 986,644 990,685 157,827 156,534 169,766 Unsecured Borrowing Capacity with Correspondent Lenders 108,000 158,000 208,000 208,000 208,000 Secured Borrowing Capacity with Correspondent Lender 26,250 26,250 26,250 40,000 25,000 Total Secondary Liquidity 1,521,686 1,421,730 782,975 831,138 971,842 Total Primary and Secondary Liquidity $ 1,962,318 $ 1,923,824 $ 1,379,678 $ 1,409,477 $ 1,497,593 Ratio of Primary and Secondary Liquidity to Total Deposits 54.8 % 56.4 % 40.4 % 42.6 % 46.8 % Asset Quality Annualized net charge-offs (recoveries) as a percentage of average loans were 0.00% for the second quarter of 2023, first quarter of 2023 and second quarter of 2022. At June 30, 2023, the Company’s nonperforming assets, which include nonaccrual loans, loans past due 90 days and still accruing, and foreclosed assets, were $778,000, or 0.02% of total assets, as compared to $809,000, or 0.02% of total assets at March 31, 2023, and $688,000, or 0.02% of total assets at June 30, 2022. Loans that have potential weaknesses that warrant a watchlist risk rating at June 30, 2023 totaled $27.2 million, compared to $27.6 million at March 31, 2023, and $34.7 million at June 30, 2022. Loans that warranted a substandard risk rating at June 30, 2023 totaled $33.8 million, compared to $36.3 million at March 31, 2023, and $27.0 million at June 30, 2022. The linked-quarter decrease was primarily due to the upgrade of one loan relationship; however, increased uncertainty in the economic environment may result in future watchlist or adverse classifications in the loan portfolio. The following table presents a summary of asset quality measurements at the dates indicated: As of and for the Three Months Ended June 30, March 31, December 31 September 30, June 30, (dollars in thousands) 2023 2023 2022 2022 2022 Selected Asset Quality Data Loans 30-89 Days Past Due $ — $ 21 $ 186 $ 38 $ 225 Loans 30-89 Days Past Due to Total Loans 0.00 % 0.00 % 0.01 % 0.00 % 0.01 % Nonperforming Loans $ 662 $ 693 $ 639 $ 663 $ 688 Nonperforming Loans to Total Loans 0.02 % 0.02 % 0.02 % 0.02 % 0.02 % Foreclosed Assets $ 116 $ 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) $ 778 $ 809 $ 639 $ 663 $ 688 Nonperforming Assets to Total Assets (1) 0.02 % 0.02 % 0.01 % 0.02 % 0.02 % Allowance for Credit Losses to Total Loans 1.36 1.36 1.34 1.38 1.39 Allowance for Credit Losses to Nonaccrual Loans 7,658.76 7,236.36 7,511.11 7,012.22 6,498.69 Net Loan Charge-Offs (Recoveries) (Annualized) to Average Loans 0.00 0.00 0.00 (0.03 ) 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 second quarter 2023 financial results on Thursday, July 27, 2023 at 8:00 a.m. Central Time. The conference call can be accessed by dialing 844-481-2913 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 5127957. The replay will be available through August 3, 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 June 30, 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 and possible recession; 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) June 30, December 31, June 30, 2023 2022 2022 (Unaudited) (Unaudited) ASSETS Cash and Cash Equivalents $ 177,101 $ 87,043 $ 73,517 Bank-Owned Certificates of Deposit 1,225 1,181 1,138 Securities Available for Sale, at Fair Value 538,220 548,613 482,583 Loans, Net of Allowance for Credit Losses of $50,701 at June 30, 2023 (unaudited), $47,996 at December 31, 2022 and $44,711 at June 30, 2022 (unaudited) 3,677,792 3,512,157 3,171,638 Federal Home Loan Bank (FHLB) Stock, at Cost 21,557 19,606 9,921 Premises and Equipment, Net 49,710 48,445 49,294 Foreclosed Assets 116 — — Accrued Interest 13,822 13,479 10,010 Goodwill 2,626 2,626 2,626 Other Intangible Assets, Net 206 288 383 Bank-Owned Life Insurance 33,958 33,485 25,614 Other Assets 86,852 78,739 56,540 Total Assets $ 4,603,185 $ 4,345,662 $ 3,883,264 LIABILITIES AND EQUITY LIABILITIES Deposits: Noninterest Bearing $ 751,217 $ 884,272 $ 961,998 Interest Bearing 2,826,715 2,532,271 2,239,955 Total Deposits 3,577,932 3,416,543 3,201,953 Federal Funds Purchased 195,000 287,000 86,000 Notes Payable 13,750 13,750 — FHLB Advances 262,000 97,000 56,500 Subordinated Debentures, Net of Issuance Costs 79,096 78,905 92,459 Accrued Interest Payable 2,974 2,831 1,393 Other Liabilities 63,307 55,569 70,076 Total Liabilities 4,194,059 3,951,598 3,508,381 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 June 30, 2023 (unaudited), December 31, 2022, and June 30, 2022 (unaudited) 66,514 66,514 66,514 Common Stock- $0.01 par value; Authorized 75,000,000 Common Stock - Issued and Outstanding 27,973,995 at June 30, 2023 (unaudited), 27,751,950 at December 31, 2022 and 27,677,372 at June 30, 2022 (unaudited) 280 278 277 Additional Paid-In Capital 99,044 96,529 96,689 Retained Earnings 264,196 248,685 222,464 Accumulated Other Comprehensive Loss (20,908 ) (17,942 ) (11,061 ) Total Shareholders' Equity 409,126 394,064 374,883 Total Liabilities and Equity $ 4,603,185 $ 4,345,662 $ 3,883,264 Bridgewater Bancshares, Inc. and Subsidiaries Consolidated Statements of Income (dollars in thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2023 2023 2022 2023 2022 INTEREST INCOME Loans, Including Fees $ 47,721 $ 44,955 $ 34,358 $ 92,676 $ 66,102 Investment Securities 6,237 6,218 3,325 12,455 6,195 Other 1,043 819 99 1,862 179 Total Interest Income 55,001 51,992 37,782 106,993 72,476 INTEREST EXPENSE Deposits 22,998 16,374 3,456 39,372 6,614 Notes Payable 285 263 — 548 — FHLB Advances 2,092 861 167 2,953 317 Subordinated Debentures 993 983 1,219 1,976 2,416 Federal Funds Purchased 2,761 4,944 410 7,705 419 Total Interest Expense 29,129 23,425 5,252 52,554 9,766 NET INTEREST INCOME 25,872 28,567 32,530 54,439 62,710 Provision for Credit Losses 50 625 3,025 675 4,700 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 25,822 27,942 29,505 53,764 58,010 NONINTEREST INCOME Customer Service Fees 368 349 298 717 579 Net Gain (Loss) on Sales of Available for Sale Securities 50 (56 ) 52 (6 ) 52 Other Income 997 1,650 1,300 2,647 2,576 Total Noninterest Income 1,415 1,943 1,650 3,358 3,207 NONINTEREST EXPENSE Salaries and Employee Benefits 8,589 8,815 8,977 17,404 17,671 Occupancy and Equipment 1,075 1,209 1,042 2,284 2,127 Other Expense 4,724 4,159 3,733 8,883 7,462 Total Noninterest Expense 14,388 14,183 13,752 28,571 27,260 INCOME BEFORE INCOME TAXES 12,849 15,702 17,403 28,551 33,957 Provision for Income Taxes 3,033 4,060 4,521 7,093 8,813 NET INCOME 9,816 11,642 12,882 21,458 25,144 Preferred Stock Dividends (1,014 ) (1,013 ) (1,014 ) (2,027 ) (2,027 ) NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 8,802 $ 10,629 $ 11,868 $ 19,431 $ 23,117 EARNINGS PER SHARE Basic $ 0.32 $ 0.38 $ 0.43 $ 0.70 $ 0.83 Diluted 0.31 0.37 0.41 0.69 0.80 Bridgewater Bancshares, Inc. and Subsidiaries Analysis of Average Balances, Yields and Rates (dollars in thousands, except per share data) (Unaudited) For the Six Months Ended June 30, 2023 June 30, 2022 Average Interest Yield/ Average Interest Yield/ Balance & Fees Rate Balance & Fees Rate (dollars in thousands) Interest Earning Assets: Cash Investments $ 61,599 $ 1,034 3.38 % $ 70,718 $ 66 0.19 % Investment Securities: Taxable Investment Securities 571,176 11,958 4.22 395,203 4,951 2.53 Tax-Exempt Investment Securities (1) 28,435 629 4.46 72,933 1,574 4.35 Total Investment Securities 599,611 12,587 4.23 468,136 6,525 2.81 Paycheck Protection Program Loans (2) 956 5 1.00 13,210 826 12.61 Loans (1)(2) 3,672,772 93,327 5.12 2,991,195 65,480 4.41 Total Loans 3,673,728 93,332 5.12 3,004,405 66,306 4.45 Federal Home Loan Bank Stock 24,639 828 6.77 8,667 113 2.63 Total Interest Earning Assets 4,359,577 107,781 4.99 % 3,551,926 73,010 4.15 % Noninterest Earning Assets 85,087 77,395 Total Assets $ 4,444,664 $ 3,629,321 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 570,964 $ 8,698 3.07 % $ 559,352 $ 1,291 0.47 % Savings and Money Market Deposits 952,865 13,547 2.87 901,102 2,103 0.47 Time Deposits 258,865 2,771 2.16 284,757 1,410 1.00 Brokered Deposits 820,651 14,356 3.53 405,282 1,810 0.90 Total Interest Bearing Deposits 2,603,345 39,372 3.05 2,150,493 6,614 0.62 Federal Funds Purchased 312,329 7,705 4.97 74,340 419 1.14 Notes Payable 13,750 548 8.03 — — — FHLB Advances 185,785 2,953 3.21 45,019 317 1.42 Subordinated Debentures 78,994 1,976 5.05 92,341 2,416 5.28 Total Interest Bearing Liabilities 3,194,203 52,554 3.32 % 2,362,193 9,766 0.83 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 786,009 852,648 Other Noninterest Bearing Liabilities 59,504 32,248 Total Noninterest Bearing Liabilities 845,513 884,896 Shareholders' Equity 404,948 382,232 Total Liabilities and Shareholders' Equity $ 4,444,664 $ 3,629,321 Net Interest Income / Interest Rate Spread 55,227 1.67 % 63,244 3.32 % Net Interest Margin (3) 2.55 % 3.59 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities and Loans (788 ) (534 ) Net Interest Income $ 54,439 $ 62,710 ______________________________ (1) Interest income and average rates for tax-exempt investment securities and loans are presented on a tax-equivalent basis, assuming a statutory federal income tax rate of 21%. (2) Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs. (3) Net interest margin includes the tax equivalent adjustment and represents the annualized results of: (i) the difference between interest income on interest earning assets and the interest expense on interest bearing liabilities, divided by (ii) average interest earning assets for the period. Bridgewater Bancshares, Inc. and Subsidiaries Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended For the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2023 2023 2022 2023 2022 Pre-Provision Net Revenue Noninterest Income $ 1,415 $ 1,943 $ 1,650 $ 3,358 $ 3,207 Less: (Gain) Loss on Sales of Securities (50 ) 56 (52 ) 6 (52 ) Less: FHLB Advance Prepayment Income — (299 ) — (299 ) — Total Operating Noninterest Income 1,365 1,700 1,598 3,065 3,155 Plus: Net Interest Income 25,872 28,567 32,530 54,439 62,710 Net Operating Revenue $ 27,237 $ 30,267 $ 34,128 $ 57,504 $ 65,865 Noninterest Expense $ 14,388 $ 14,183 $ 13,752 $ 28,571 $ 27,260 Less: Amortization of Tax Credit Investments (114 ) (114 ) (63 ) (228 ) (180 ) Total Operating Noninterest Expense $ 14,274 $ 14,069 $ 13,689 $ 28,343 $ 27,080 Pre-Provision Net Revenue $ 12,963 $ 16,198 $ 20,439 $ 29,161 $ 38,785 Plus: Non-Operating Revenue Adjustments 50 243 52 293 52 Less: Provision for Credit Losses 50 625 3,025 675 4,700 Non-Operating Expense Adjustments 114 114 63 228 180 Provision for Income Taxes 3,033 4,060 4,521 7,093 8,813 Net Income $ 9,816 $ 11,642 $ 12,882 $ 21,458 $ 25,144 Average Assets $ 4,483,662 $ 4,405,234 $ 3,743,575 $ 4,444,664 $ 3,629,321 Pre-Provision Net Revenue Return on Average Assets 1.16 % 1.49 % 2.19 % 1.32 % 2.16 % As of and for the Three Months Ended As of and for the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2023 2023 2022 2023 2022 Core Net Interest Margin Net Interest Income (Tax-Equivalent Basis) $ 26,280 $ 28,947 $ 32,806 $ 55,227 $ 63,244 Less: Loan Fees (941 ) (998 ) (2,030 ) (1,939 ) (3,773 ) Less: PPP Interest and Fees (3 ) (2 ) (263 ) (5 ) (826 ) Core Net Interest Income $ 25,336 $ 27,947 $ 30,513 $ 53,283 $ 58,645 Average Interest Earning Assets $ 4,395,050 $ 4,323,706 $ 3,671,748 $ 4,359,576 $ 3,551,926 Less: Average PPP Loans (913 ) (999 ) (8,335 ) (956 ) (13,210 ) Core Average Interest Earning Assets $ 4,394,137 $ 4,322,707 $ 3,663,413 $ 4,358,620 $ 3,538,716 Core Net Interest Margin 2.31 % 2.62 % 3.34 % 2.47 % 3.34 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended For the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2023 2023 2022 2023 2022 Efficiency Ratio Noninterest Expense $ 14,388 $ 14,183 $ 13,752 $ 28,571 $ 27,260 Less: Amortization of Intangible Assets (34 ) (48 ) (47 ) (82 ) (95 ) Adjusted Noninterest Expense $ 14,354 $ 14,135 $ 13,705 $ 28,489 $ 27,165 Net Interest Income 25,872 28,567 32,530 54,439 62,710 Noninterest Income 1,415 1,943 1,650 3,358 3,207 Less: (Gain) Loss on Sales of Securities (50 ) 56 (52 ) 6 (52 ) Adjusted Operating Revenue $ 27,237 $ 30,566 $ 34,128 $ 57,803 $ 65,865 Efficiency Ratio 52.7 % 46.2 % 40.2 % 49.3 % 41.2 % As of and for the Three Months Ended As of and for the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2023 2023 2022 2023 2022 Tangible Common Equity and Tangible Common Equity/Tangible Assets Total Shareholders' Equity $ 409,126 $ 402,006 $ 374,883 Less: Preferred Stock (66,514 ) (66,514 ) (66,514 ) Total Common Shareholders' Equity 342,612 335,492 308,369 Less: Intangible Assets (2,832 ) (2,866 ) (3,009 ) Tangible Common Equity $ 339,780 $ 332,626 $ 305,360 Total Assets $ 4,603,185 $ 4,602,899 $ 3,883,264 Less: Intangible Assets (2,832 ) (2,866 ) (3,009 ) Tangible Assets $ 4,600,353 $ 4,600,033 $ 3,880,255 Tangible Common Equity/Tangible Assets 7.39 % 7.23 % 7.87 % Tangible Book Value Per Share Book Value Per Common Share $ 12.25 $ 12.05 $ 11.14 Less: Effects of Intangible Assets (0.10 ) (0.10 ) (0.11 ) Tangible Book Value Per Common Share $ 12.15 $ 11.95 $ 11.03 Return on Average Tangible Common Equity Net Income Available to Common Shareholders $ 8,802 $ 10,629 $ 11,868 $ 19,431 $ 23,117 Average Shareholders' Equity $ 406,347 $ 403,533 $ 381,448 $ 404,948 $ 382,232 Less: Average Preferred Stock (66,514 ) (66,514 ) (66,514 ) (66,514 ) (66,514 ) Average Common Equity 339,833 337,019 314,934 338,434 315,718 Less: Effects of Average Intangible Assets (2,846 ) (2,894 ) (3,037 ) (2,870 ) (3,060 ) Average Tangible Common Equity $ 336,987 $ 334,125 $ 311,897 $ 335,564 $ 312,658 Return on Average Tangible Common Equity 10.48 % 12.90 % 15.26 % 11.68 % 14.91 % Three Months Ended June 30, March 31, December 31, September 30, June 30, 2023 2023 2022 2022 2022 Tangible Common Equity Total Shareholders' Equity $ 409,126 $ 402,006 $ 394,064 $ 382,007 $ 374,883 Less: Preferred Stock (66,514 ) (66,514 ) (66,514 ) (66,514 ) (66,514 ) Common Shareholders' Equity 342,612 335,492 327,550 315,493 308,369 Less: Intangible Assets (2,832 ) (2,866 ) (2,914 ) (2,962 ) (3,009 ) Tangible Common Equity $ 339,780 $ 332,626 $ 324,636 $ 312,531 $ 305,360 View source version on businesswire.com: https://www.businesswire.com/news/home/20230725009497/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
Second Quarter 2023 Highlights Annualized return on average assets (ROA) of 0.88%, compared to 1.07% for the first quarter of 2023. Annualized return on average shareholders’ equity (ROE) of 9.69%, compared to 11.70% for the first quarter of 2023, and annualized return on average tangible common equity (ROATCE)(1) of 10.48%, compared to 12.90% for the first quarter of 2023. Gross loans increased $51.9 million, or 5.6% annualized, from the first quarter of 2023. Deposits increased by $166.8 million, or 19.6% annualized, from the first quarter of 2023, including an increase of core deposits(2) of $45.3 million, or 7.4% annualized. Total borrowing capacity of $1.5 billion at June 30, 2023, compared to $783.0 million at December 31, 2022. Net interest margin (on a fully tax-equivalent basis) of 2.40%, compared to 2.72% in the first quarter of 2023. Efficiency ratio(1) of 52.7%, compared to 46.2% for the first quarter of 2023. Noninterest expense increased slightly by $205,000, or 1.4%, from the first quarter of 2023, with annualized noninterest expense to average assets of 1.29%, compared to 1.31% for the first quarter of 2023. A credit loss provision of $550,000 was recorded to support continued loan growth, with allowance for credit losses to total loans of 1.36% at both June 30, 2023 and March 31, 2023. Annualized net loan charge-offs (recoveries) as a percentage of average loans of 0.00% for the second quarter of 2023, in-line with the first quarter of 2023. Nonperforming assets to total assets of 0.02% at June 30, 2023 and March 31, 2023. Tangible book value per share(1) of $12.15 at June 30, 2023, an increase of $0.20, or 6.7% annualized, compared to $11.95 at March 31, 2023. (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. (2) Core deposits are defined as total deposits less brokered deposits and certificates of deposit greater than $250,000.
Bridgewater Bancshares, Inc. (Nasdaq: BWB) (the Company), the parent company of Bridgewater Bank (the Bank), today announced net income of $9.8 million for the second quarter of 2023, compared to $11.6 million for the first quarter of 2023, and $12.9 million for the second quarter of 2022. Earnings per diluted common share for the second quarter of 2023 were $0.31, compared to $0.37 per diluted common share for the first quarter of 2023, and $0.41 per diluted common share for the same period in 2022. “Bridgewater’s second quarter results were highlighted by several improving financial trends as we continue to manage the business through a challenging banking environment,” said Chairman, Chief Executive Officer, and President, Jerry Baack. “The overall composition of our balance sheet improved with a strong inflow of deposits, including growth in core deposits, and a reduction in overall borrowings. While our net interest margin remained under pressure, we saw the pace of compression slow noticeably on a month-to-month basis during the quarter. In addition, noninterest expense was again well controlled and asset quality remained superb.” “During the quarter, our teams maintained their focus on supporting and growing our client base, both by proactively engaging with our existing clients and cultivating new relationships across the Twin Cities market. In July, we also relocated our downtown Minneapolis branch to an enhanced location with more space to better serve our clients. We believe our proven ability to develop strong client relationships, combined with encouraging financial trends, will continue to drive success moving forward.” Key Financial Measures As of and for the Three Months Ended As of and for the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2023 2023 2022 2023 2022 Per Common Share Data Basic Earnings Per Share $ 0.32 $ 0.38 $ 0.43 $ 0.70 $ 0.83 Diluted Earnings Per Share 0.31 0.37 0.41 0.69 0.80 Book Value Per Share 12.25 12.05 11.14 12.25 11.14 Tangible Book Value Per Share (1) 12.15 11.95 11.03 12.15 11.03 Basic Weighted Average Shares Outstanding 27,886,425 27,726,894 27,839,260 27,807,100 27,980,749 Diluted Weighted Average Shares Outstanding 28,198,739 28,490,046 28,803,842 28,350,705 28,991,780 Shares Outstanding at Period End 27,973,995 27,845,244 27,677,372 27,973,995 27,677,372 Selected Performance Ratios Return on Average Assets (Annualized) 0.88 % 1.07 % 1.38 % 0.97 % 1.40 % Pre-Provision Net Revenue Return on Average Assets (Annualized) (1) 1.16 1.49 2.19 1.32 2.16 Return on Average Shareholders' Equity (Annualized) 9.69 11.70 13.55 10.69 13.27 Return on Average Tangible Common Equity (Annualized) (1) 10.48 12.90 15.26 11.68 14.91 Yield on Interest Earning Assets (2) 5.06 4.91 4.16 4.99 4.15 Yield on Total Loans, Gross (2) 5.19 5.06 4.45 5.12 4.45 Cost of Total Deposits 2.66 2.01 0.46 2.34 0.44 Cost of Funds 2.91 2.41 0.63 2.66 0.61 Net Interest Margin (2) 2.40 2.72 3.58 2.55 3.59 Core Net Interest Margin (1)(2) 2.31 2.62 3.34 2.47 3.34 Efficiency Ratio (1) 52.7 46.2 40.2 49.3 41.2 Noninterest Expense to Average Assets (Annualized) 1.29 1.31 1.47 1.30 1.51 Loan to Deposit Ratio 104.4 108.0 100.7 Core Deposits to Total Deposits (3) 70.3 72.4 82.9 Tangible Common Equity to Tangible Assets (1) 7.39 7.23 7.87 Capital Ratios (Bank Only) (4) Tier 1 Leverage Ratio 10.69 % 10.61 % 11.43 % Common Equity Tier 1 Risk-based Capital Ratio 11.66 11.37 11.53 Tier 1 Risk-based Capital Ratio 11.66 11.37 11.53 Total Risk-based Capital Ratio 12.91 12.62 12.74 Capital Ratios (Consolidated) (4) Tier 1 Leverage Ratio 9.47 % 9.41 % 10.33 % Common Equity Tier 1 Risk-based Capital Ratio 8.72 8.48 8.50 Tier 1 Risk-based Capital Ratio 10.33 10.08 10.29 Total Risk-based Capital Ratio 13.50 13.25 13.98 ______________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. (2) Amounts calculated on a tax-equivalent basis using the statutory federal tax rate of 21%. (3) Core deposits are defined as total deposits less brokered deposits and certificates of deposit greater than $250,000. (4) Preliminary data. Current period subject to change prior to filings with applicable regulatory agencies. Selected Financial Data June 30, March 31, December 31, September 30, June 30, (dollars in thousands) 2023 2023 2022 2022 2022 Selected Balance Sheet Data Total Assets $ 4,603,185 $ 4,602,899 $ 4,345,662 $ 4,128,987 $ 3,883,264 Total Loans, Gross 3,736,211 3,684,360 3,569,446 3,380,082 3,225,885 Allowance for Credit Losses 50,701 50,148 47,996 46,491 44,711 Goodwill and Other Intangibles 2,832 2,866 2,914 2,962 3,009 Deposits 3,577,932 3,411,123 3,416,543 3,305,074 3,201,953 Tangible Common Equity (1) 339,780 332,626 324,636 312,531 305,360 Total Shareholders' Equity 409,126 402,006 394,064 382,007 374,883 Average Total Assets - Quarter-to-Date 4,483,662 4,405,234 4,251,345 3,948,201 3,743,575 Average Shareholders' Equity - Quarter-to-Date 406,347 403,533 387,589 384,020 381,448 ______________________________ (1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for further details. For the Three Months Ended For the Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2023 2023 2022 2023 2022 Selected Income Statement Data Interest Income $ 55,001 $ 51,992 $ 37,782 $ 106,993 $ 72,476 Interest Expense 29,129 23,425 5,252 52,554 9,766 Net Interest Income 25,872 28,567 32,530 54,439 62,710 Provision for Credit Losses 50 625 3,025 675 4,700 Net Interest Income after Provision for Credit Losses 25,822 27,942 29,505 53,764 58,010 Noninterest Income 1,415 1,943 1,650 3,358 3,207 Noninterest Expense 14,388 14,183 13,752 28,571 27,260 Income Before Income Taxes 12,849 15,702 17,403 28,551 33,957 Provision for Income Taxes 3,033 4,060 4,521 7,093 8,813 Net Income 9,816 11,642 12,882 21,458 25,144 Preferred Stock Dividends (1,014 ) (1,013 ) (1,014 ) (2,027 ) (2,027 ) Net Income Available to Common Shareholders $ 8,802 $ 10,629 $ 11,868 $ 19,431 $ 23,117 Income Statement Net Interest Income Net interest income was $25.9 million for the second quarter of 2023, a decrease of $2.7 million, from $28.6 million in the first quarter of 2023, and a decrease of $6.7 million, from $32.5 million in the second quarter of 2022. The linked-quarter decrease in net interest income was primarily due to higher rates paid on deposits in the rising interest rate environment. The 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 $4.40 billion for the second quarter of 2023, an increase of $71.3 million, or 1.7%, from $4.32 billion for the first quarter of 2023, and an increase of $723.3 million, or 19.7%, from $3.67 billion for the second 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. Net interest margin (on a fully tax-equivalent basis) for the second quarter of 2023 was 2.40%, a 32 basis point decrease from 2.72% in the first quarter of 2023, and a 118 basis point decrease from 3.58% in the second quarter of 2022. Core net interest margin (on a fully tax-equivalent basis), a non-GAAP financial measure which excludes the impact of loan fees and PPP balances, interest, and fees, for the second quarter of 2023 was 2.31%, a 31 basis point decrease from 2.62% in the first quarter of 2023, and a 103 basis point decrease from 3.34% in the second quarter of 2022. The linked-quarter decline in the margin was primarily due to higher funding costs, offset partially by higher earning asset yields. The year-over-year decline in the margin 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 $55.0 million for the second quarter of 2023, an increase of $3.0 million, from $52.0 million in the first quarter of 2023, and an increase of $17.2 million, from $37.8 million in the second quarter of 2022. The yield on interest earning assets (on a fully tax-equivalent basis) was 5.06% in the second quarter of 2023, compared to 4.91% in the first quarter of 2023, and 4.16% in the second 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 and loans repricing at yields accretive to the existing portfolio. 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. 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 5.19% in the second quarter of 2023, which was 13 basis points higher than 5.06% in the first quarter of 2023, and 76 basis points higher than 4.43% in the second 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 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 Interest 5.09 % 4.95 % 4.74 % 4.42 % 4.17 % Fees 0.10 0.11 0.12 0.17 0.26 Yield on Loans, Excluding PPP Loans 5.19 % 5.06 % 4.86 % 4.59 % 4.43 % Interest expense was $29.1 million for the second quarter of 2023, an increase of $5.7 million, from $23.4 million in the first quarter of 2023, and an increase of $23.9 million, from $5.3 million in the second quarter of 2022. The cost of interest bearing liabilities increased 56 basis points on a linked-quarter basis from 3.03% in the first quarter of 2023 to 3.59% in the second quarter of 2023, primarily due to higher rates paid on deposits and increased utilization of FHLB advances in the rising interest rate environment. On a year-over-year basis, the cost of interest bearing liabilities increased 273 basis points from 0.86% in the second quarter of 2022 to 3.59% in the second 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 $23.0 million for the second quarter of 2023, an increase of $6.6 million, from $16.4 million in the first quarter of 2023, and an increase of $19.5 million, from $3.5 million in the second quarter of 2022. The cost of total deposits increased 65 basis points on a linked-quarter basis from 2.01% in the first quarter of 2023, to 2.66% in the second 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 220 basis points from 0.46% in the second quarter of 2022, to 2.66% in the second quarter of 2023, primarily due to 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 June 30, 2023, March 31, 2023, and June 30, 2022 is as follows: For the Three Months Ended June 30, 2023 March 31, 2023 June 30, 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 $ 59,963 $ 587 3.93 % $ 63,253 $ 447 2.86 % $ 61,046 $ 40 0.26 % Investment Securities: Taxable Investment Securities 568,143 6,000 4.24 574,242 5,958 4.21 417,142 2,696 2.59 Tax-Exempt Investment Securities (1) 27,081 300 4.44 29,803 330 4.49 74,261 795 4.30 Total Investment Securities 595,224 6,300 4.24 604,045 6,288 4.22 491,403 3,491 2.85 Paycheck Protection Program Loans (2) 913 2 1.00 999 2 1.00 8,335 263 12.67 Loans (1)(2) 3,715,621 48,064 5.19 3,629,447 45,263 5.06 3,099,344 34,205 4.43 Total Loans 3,716,534 48,066 5.19 3,630,446 45,265 5.06 3,107,679 34,468 4.45 Federal Home Loan Bank Stock 23,330 456 7.84 25,962 372 5.81 11,620 59 2.04 Total Interest Earning Assets 4,395,051 55,409 5.06 % 4,323,706 52,372 4.91 % 3,671,748 38,058 4.16 % Noninterest Earning Assets 88,611 81,528 71,827 Total Assets $ 4,483,662 $ 4,405,234 $ 3,743,575 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 683,034 $ 5,918 3.48 % $ 461,372 $ 2,780 2.44 % $ 552,502 $ 694 0.50 % Savings and Money Market Deposits 861,947 7,048 3.28 1,044,794 6,499 2.52 925,354 1,185 0.51 Time Deposits 269,439 1,702 2.53 248,174 1,069 1.75 280,645 665 0.95 Brokered Deposits 896,989 8,330 3.72 743,465 6,026 3.29 403,931 912 0.91 Total Interest Bearing Deposits 2,711,409 22,998 3.40 2,497,805 16,374 2.66 2,162,432 3,456 0.64 Federal Funds Purchased 210,677 2,761 5.26 415,111 4,944 4.83 137,379 410 1.20 Notes Payable 13,750 285 8.33 13,750 263 7.77 — — — FHLB Advances 242,714 2,092 3.46 128,222 861 2.72 47,511 167 1.41 Subordinated Debentures 79,041 993 5.04 78,945 983 5.05 92,396 1,219 5.29 Total Interest Bearing Liabilities 3,257,591 29,129 3.59 % 3,133,833 23,425 3.03 % 2,439,718 5,252 0.86 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 755,040 813,598 882,477 Other Noninterest Bearing Liabilities 64,684 54,270 39,932 Total Noninterest Bearing Liabilities 819,724 867,868 922,409 Shareholders' Equity 406,347 403,533 381,448 Total Liabilities and Shareholders' Equity $ 4,483,662 $ 4,405,234 $ 3,743,575 Net Interest Income / Interest Rate Spread 26,280 1.47 % 28,947 1.88 % 32,806 3.30 % Net Interest Margin (3) 2.40 % 2.72 % 3.58 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities and Loans (408 ) (380 ) (276 ) Net Interest Income $ 25,872 $ 28,567 $ 32,530 ______________________________ (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 The provision for credit losses on loans was $550,000 for the second quarter of 2023, compared to $1.5 million for the first quarter of 2023 and $3.0 million for the second quarter of 2022. The provision recorded in the second quarter of 2023 was primarily attributable to the growth of the loan portfolio. The allowance for credit losses on loans to total loans was 1.36% at June 30, 2023 and March 31, 2023, compared to 1.39% at June 30, 2022. The following table presents the activity in the Company’s allowance for credit losses on loans for the periods indicated: Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2023 2023 2022 2023 2022 Balance at Beginning of Period $ 50,148 $ 47,996 $ 41,692 $ 47,996 $ 40,020 Impact of Adopting CECL — 650 — 650 — Provision for Credit Losses 550 1,500 3,025 2,050 4,700 Charge-offs (3 ) (4 ) (14 ) (7 ) (29 ) Recoveries 6 6 8 12 20 Balance at End of Period $ 50,701 $ 50,148 $ 44,711 $ 50,701 $ 44,711 The provision for credit losses for off-balance sheet credit exposures was a negative provision of $500,000 for the second quarter of 2023, compared to a negative $875,000 for the first quarter of 2023 and zero for the second 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. The following table presents a summary of the activity in the provision for credit losses for the periods indicated: Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2023 2023 2022 2023 2022 Provision for Credit Losses on Loans $ 550 $ 1,500 $ 3,025 $ 2,050 $ 4,700 Provision for Credit Losses for Off-Balance Sheet Credit Exposures (500 ) (875 ) — (1,375 ) — Provision for Credit Losses $ 50 $ 625 $ 3,025 $ 675 $ 4,700 Noninterest Income Noninterest income was $1.4 million for the second quarter of 2023, a decrease of $528,000 from $1.9 million for the first quarter of 2023, and a decrease of $235,000 from $1.7 million for the second quarter of 2022. The linked-quarter decrease was primarily due to a decrease in letter of credit fees and FHLB prepayment income. The year-over-year decrease was primarily due to decreased letter of credit fees and other income, offset partially by an increase in customer service fees and bank-owned life insurance income. The following table presents the major components of noninterest income for the periods indicated: Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2023 2023 2022 2023 2022 Noninterest Income: Customer Service Fees $ 368 $ 349 $ 298 $ 717 $ 579 Net Gain (Loss) on Sales of Securities 50 (56 ) 52 (6 ) 52 Letter of Credit Fees 379 634 564 1,013 806 Debit Card Interchange Fees 155 138 152 293 285 Swap Fees — — — — 557 Bank-Owned Life Insurance 238 234 149 472 297 FHLB Prepayment Income — 299 — 299 — Other Income 225 345 435 570 631 Totals $ 1,415 $ 1,943 $ 1,650 $ 3,358 $ 3,207 Noninterest Expense Noninterest expense was $14.4 million for the second quarter of 2023, an increase of $205,000 from $14.2 million for the first quarter of 2023, and an increase of $636,000 from $13.8 million for the second quarter of 2022. The linked-quarter increase was primarily due to industry-wide increases in the FDIC insurance assessment, offset partially by a decrease in salaries and employee benefits resulting from lower discretionary incentive accruals and a decrease in occupancy and equipment. The year-over-year increase was primarily attributable to increases in the FDIC insurance assessment and derivative collateral fees, offset partially by decreases in salaries and employee benefits and marketing and advertising. The following table presents the major components of noninterest expense for the periods indicated: Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, (dollars in thousands) 2023 2023 2022 2023 2022 Noninterest Expense: Salaries and Employee Benefits $ 8,589 $ 8,815 $ 8,977 $ 17,404 $ 17,671 Occupancy and Equipment 1,075 1,209 1,042 2,284 2,127 FDIC Insurance Assessment 900 665 330 1,565 690 Data Processing 401 357 356 758 653 Professional and Consulting Fees 829 755 742 1,584 1,436 Derivative Collateral Fees 404 380 27 784 29 Information Technology and Telecommunications 711 683 594 1,394 1,172 Marketing and Advertising 321 262 524 583 1,150 Intangible Asset Amortization 34 48 47 82 95 Amortization of Tax Credit Investments 114 114 63 228 180 Other Expense 1,010 895 1,050 1,905 2,057 Totals $ 14,388 $ 14,183 $ 13,752 $ 28,571 $ 27,260 The Company had 253 full-time equivalent employees at June 30, 2023, compared to 246 employees at March 31, 2023, and 236 employees at June 30, 2022. The efficiency ratio, a non-GAAP financial measure, was 52.7% for the second quarter of 2023, compared to 46.2% for the first quarter of 2023, and 40.2% for the second quarter of 2022. Income Taxes The effective combined federal and state income tax rate for the second quarter of 2023 was 23.6%, a decrease from 25.9% for the first quarter of 2023, and 26.0% for the second quarter of 2022. Balance Sheet Total assets at June 30, 2023 and March 31, 2023 were $4.60 billion, an 18.5% increase from $3.88 billion at June 30, 2022. 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 June 30, 2023 were $3.74 billion, an increase of $51.9 million, or 5.6% annualized, over total gross loans of $3.68 billion at March 31, 2023, and an increase of $510.3 million, or 15.8%, over total gross loans of $3.23 billion at June 30, 2022. The increase in the loan portfolio during the second quarter of 2023 was primarily due to the funding of existing construction and land development loans and growth in the 1-4 family mortgage segment, offset partially by a decrease in the 1-4 family construction segment. The following table presents the dollar composition of the Company’s loan portfolio, by category, at the dates indicated: June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 (dollars in thousands) Commercial $ 459,184 $ 454,193 $ 435,344 $ 412,448 $ 403,569 Paycheck Protection Program 877 963 1,049 1,192 4,860 Construction and Land Development 351,069 312,277 295,554 280,380 305,552 1 - 4 Family Construction 69,648 85,797 70,242 55,177 53,639 Real Estate Mortgage: 1 - 4 Family Mortgage 400,708 380,210 355,474 341,102 334,815 Multifamily 1,314,524 1,320,081 1,306,738 1,230,509 1,087,865 CRE Owner Occupied 159,088 158,650 149,905 151,088 142,214 CRE Nonowner Occupied 971,532 962,671 947,008 900,691 886,432 Total Real Estate Mortgage Loans 2,845,852 2,821,612 2,759,125 2,623,390 2,451,326 Consumer and Other 9,581 9,518 8,132 7,495 6,939 Total Loans, Gross 3,736,211 3,684,360 3,569,446 3,380,082 3,225,885 Allowance for Loan Losses (50,701 ) (50,148 ) (47,996 ) (46,491 ) (44,711 ) Net Deferred Loan Fees (7,718 ) (8,735 ) (9,293 ) (9,088 ) (9,536 ) Total Loans, Net $ 3,677,792 $ 3,625,477 $ 3,512,157 $ 3,324,503 $ 3,171,638 Total deposits at June 30, 2023 were $3.58 billion, an increase of $166.8 million, or 19.6% annualized, over total deposits of $3.41 billion at March 31, 2023, and an increase of $376.0 million, or 11.7%, over total deposits of $3.20 billion at June 30, 2022. Deposits increased in the second quarter of 2023 primarily due to inflows of core deposits, defined as deposits excluding brokered deposits and time deposits greater than $250,000, and brokered deposits. Brokered deposits continue to be used as a supplemental funding source, as needed, to support continued loan portfolio growth. Uninsured deposits as of June 30, 2023 were 22% of total deposits, down from 24% as of March 31, 2023. The following table presents the dollar composition of the Company’s deposit portfolio, by category, at the dates indicated: June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 (dollars in thousands) Noninterest Bearing Transaction Deposits $ 751,217 $ 742,198 $ 884,272 $ 961,084 $ 961,998 Interest Bearing Transaction Deposits 719,488 630,037 451,992 510,396 522,151 Savings and Money Market Deposits 860,613 913,013 1,031,873 1,077,333 952,138 Time Deposits 271,783 266,213 272,253 293,052 272,424 Brokered Deposits 974,831 859,662 776,153 463,209 493,242 Total Deposits $ 3,577,932 $ 3,411,123 $ 3,416,543 $ 3,305,074 $ 3,201,953 Capital Total shareholders’ equity at June 30, 2023 was $409.1 million, an increase of $7.1 million, or 1.8%, compared to total shareholders’ equity of $402.0 million at March 31, 2023, and an increase of $34.2 million, or 9.1%, over total shareholders’ equity of $374.9 million at June 30, 2022. The linked-quarter 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 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 the Current Expected Credit Losses (CECL) accounting methodology and preferred stock dividends. The Company did not purchase any shares of its common stock during the second quarter of 2023. Tangible book value per share, a non-GAAP financial measure, was $12.15 as of June 30, 2023, an increase of 1.7% from $11.95 as of March 31, 2023, and an increase of 10.1% from $11.03 as of June 30, 2022. The linked-quarter and year-over-year increases occurred despite the market value depreciation of the securities portfolio driven by the rising interest rate environment. Tangible common equity as a percentage of tangible assets, a non-GAAP financial measure, was 7.39% at June 30, 2023, compared to 7.23% at March 31, 2023, and 7.87% at June 30, 2022. Today, the Company also announced that its Board of Directors has 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 September 1, 2023 to shareholders of record of the Series A Preferred Stock at the close of business on August 15, 2023. Liquidity Total on- and off-balance sheet liquidity was $1.96 billion as of June 30, 2023, compared to $1.92 billion at March 31, 2023 and $1.53 billion at June 30, 2022. The Company did not utilize the Bank Term Funding Program (BTFP) or Federal Reserve Discount Window during the second quarter of 2023. Primary Liquidity—On-Balance Sheet June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 (dollars in thousands) Cash and Cash Equivalents $ 138,618 $ 177,116 $ 48,090 $ 36,332 $ 43,168 Securities Available for Sale 538,220 559,430 548,613 542,007 482,583 Less: Pledged Securities (236,206 ) (234,452 ) — — — Total Primary Liquidity $ 440,632 $ 502,094 $ 596,703 $ 578,339 $ 525,751 Ratio of Primary Liquidity to Total Deposits 12.3 % 14.7 % 17.5 % 17.5 % 16.4 % Secondary Liquidity—Off-Balance Sheet Borrowing Capacity Net Secured Borrowing Capacity with the FHLB $ 400,792 $ 246,795 $ 390,898 $ 426,604 $ 569,076 Net Secured Borrowing Capacity with the Federal Reserve Bank 986,644 990,685 157,827 156,534 169,766 Unsecured Borrowing Capacity with Correspondent Lenders 108,000 158,000 208,000 208,000 208,000 Secured Borrowing Capacity with Correspondent Lender 26,250 26,250 26,250 40,000 25,000 Total Secondary Liquidity 1,521,686 1,421,730 782,975 831,138 971,842 Total Primary and Secondary Liquidity $ 1,962,318 $ 1,923,824 $ 1,379,678 $ 1,409,477 $ 1,497,593 Ratio of Primary and Secondary Liquidity to Total Deposits 54.8 % 56.4 % 40.4 % 42.6 % 46.8 % Asset Quality Annualized net charge-offs (recoveries) as a percentage of average loans were 0.00% for the second quarter of 2023, first quarter of 2023 and second quarter of 2022. At June 30, 2023, the Company’s nonperforming assets, which include nonaccrual loans, loans past due 90 days and still accruing, and foreclosed assets, were $778,000, or 0.02% of total assets, as compared to $809,000, or 0.02% of total assets at March 31, 2023, and $688,000, or 0.02% of total assets at June 30, 2022. Loans that have potential weaknesses that warrant a watchlist risk rating at June 30, 2023 totaled $27.2 million, compared to $27.6 million at March 31, 2023, and $34.7 million at June 30, 2022. Loans that warranted a substandard risk rating at June 30, 2023 totaled $33.8 million, compared to $36.3 million at March 31, 2023, and $27.0 million at June 30, 2022. The linked-quarter decrease was primarily due to the upgrade of one loan relationship; however, increased uncertainty in the economic environment may result in future watchlist or adverse classifications in the loan portfolio. The following table presents a summary of asset quality measurements at the dates indicated: As of and for the Three Months Ended June 30, March 31, December 31 September 30, June 30, (dollars in thousands) 2023 2023 2022 2022 2022 Selected Asset Quality Data Loans 30-89 Days Past Due $ — $ 21 $ 186 $ 38 $ 225 Loans 30-89 Days Past Due to Total Loans 0.00 % 0.00 % 0.01 % 0.00 % 0.01 % Nonperforming Loans $ 662 $ 693 $ 639 $ 663 $ 688 Nonperforming Loans to Total Loans 0.02 % 0.02 % 0.02 % 0.02 % 0.02 % Foreclosed Assets $ 116 $ 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) $ 778 $ 809 $ 639 $ 663 $ 688 Nonperforming Assets to Total Assets (1) 0.02 % 0.02 % 0.01 % 0.02 % 0.02 % Allowance for Credit Losses to Total Loans 1.36 1.36 1.34 1.38 1.39 Allowance for Credit Losses to Nonaccrual Loans 7,658.76 7,236.36 7,511.11 7,012.22 6,498.69 Net Loan Charge-Offs (Recoveries) (Annualized) to Average Loans 0.00 0.00 0.00 (0.03 ) 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 second quarter 2023 financial results on Thursday, July 27, 2023 at 8:00 a.m. Central Time. The conference call can be accessed by dialing 844-481-2913 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 5127957. The replay will be available through August 3, 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 June 30, 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 and possible recession; 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) June 30, December 31, June 30, 2023 2022 2022 (Unaudited) (Unaudited) ASSETS Cash and Cash Equivalents $ 177,101 $ 87,043 $ 73,517 Bank-Owned Certificates of Deposit 1,225 1,181 1,138 Securities Available for Sale, at Fair Value 538,220 548,613 482,583 Loans, Net of Allowance for Credit Losses of $50,701 at June 30, 2023 (unaudited), $47,996 at December 31, 2022 and $44,711 at June 30, 2022 (unaudited) 3,677,792 3,512,157 3,171,638 Federal Home Loan Bank (FHLB) Stock, at Cost 21,557 19,606 9,921 Premises and Equipment, Net 49,710 48,445 49,294 Foreclosed Assets 116 — — Accrued Interest 13,822 13,479 10,010 Goodwill 2,626 2,626 2,626 Other Intangible Assets, Net 206 288 383 Bank-Owned Life Insurance 33,958 33,485 25,614 Other Assets 86,852 78,739 56,540 Total Assets $ 4,603,185 $ 4,345,662 $ 3,883,264 LIABILITIES AND EQUITY LIABILITIES Deposits: Noninterest Bearing $ 751,217 $ 884,272 $ 961,998 Interest Bearing 2,826,715 2,532,271 2,239,955 Total Deposits 3,577,932 3,416,543 3,201,953 Federal Funds Purchased 195,000 287,000 86,000 Notes Payable 13,750 13,750 — FHLB Advances 262,000 97,000 56,500 Subordinated Debentures, Net of Issuance Costs 79,096 78,905 92,459 Accrued Interest Payable 2,974 2,831 1,393 Other Liabilities 63,307 55,569 70,076 Total Liabilities 4,194,059 3,951,598 3,508,381 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 June 30, 2023 (unaudited), December 31, 2022, and June 30, 2022 (unaudited) 66,514 66,514 66,514 Common Stock- $0.01 par value; Authorized 75,000,000 Common Stock - Issued and Outstanding 27,973,995 at June 30, 2023 (unaudited), 27,751,950 at December 31, 2022 and 27,677,372 at June 30, 2022 (unaudited) 280 278 277 Additional Paid-In Capital 99,044 96,529 96,689 Retained Earnings 264,196 248,685 222,464 Accumulated Other Comprehensive Loss (20,908 ) (17,942 ) (11,061 ) Total Shareholders' Equity 409,126 394,064 374,883 Total Liabilities and Equity $ 4,603,185 $ 4,345,662 $ 3,883,264 Bridgewater Bancshares, Inc. and Subsidiaries Consolidated Statements of Income (dollars in thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2023 2023 2022 2023 2022 INTEREST INCOME Loans, Including Fees $ 47,721 $ 44,955 $ 34,358 $ 92,676 $ 66,102 Investment Securities 6,237 6,218 3,325 12,455 6,195 Other 1,043 819 99 1,862 179 Total Interest Income 55,001 51,992 37,782 106,993 72,476 INTEREST EXPENSE Deposits 22,998 16,374 3,456 39,372 6,614 Notes Payable 285 263 — 548 — FHLB Advances 2,092 861 167 2,953 317 Subordinated Debentures 993 983 1,219 1,976 2,416 Federal Funds Purchased 2,761 4,944 410 7,705 419 Total Interest Expense 29,129 23,425 5,252 52,554 9,766 NET INTEREST INCOME 25,872 28,567 32,530 54,439 62,710 Provision for Credit Losses 50 625 3,025 675 4,700 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 25,822 27,942 29,505 53,764 58,010 NONINTEREST INCOME Customer Service Fees 368 349 298 717 579 Net Gain (Loss) on Sales of Available for Sale Securities 50 (56 ) 52 (6 ) 52 Other Income 997 1,650 1,300 2,647 2,576 Total Noninterest Income 1,415 1,943 1,650 3,358 3,207 NONINTEREST EXPENSE Salaries and Employee Benefits 8,589 8,815 8,977 17,404 17,671 Occupancy and Equipment 1,075 1,209 1,042 2,284 2,127 Other Expense 4,724 4,159 3,733 8,883 7,462 Total Noninterest Expense 14,388 14,183 13,752 28,571 27,260 INCOME BEFORE INCOME TAXES 12,849 15,702 17,403 28,551 33,957 Provision for Income Taxes 3,033 4,060 4,521 7,093 8,813 NET INCOME 9,816 11,642 12,882 21,458 25,144 Preferred Stock Dividends (1,014 ) (1,013 ) (1,014 ) (2,027 ) (2,027 ) NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 8,802 $ 10,629 $ 11,868 $ 19,431 $ 23,117 EARNINGS PER SHARE Basic $ 0.32 $ 0.38 $ 0.43 $ 0.70 $ 0.83 Diluted 0.31 0.37 0.41 0.69 0.80 Bridgewater Bancshares, Inc. and Subsidiaries Analysis of Average Balances, Yields and Rates (dollars in thousands, except per share data) (Unaudited) For the Six Months Ended June 30, 2023 June 30, 2022 Average Interest Yield/ Average Interest Yield/ Balance & Fees Rate Balance & Fees Rate (dollars in thousands) Interest Earning Assets: Cash Investments $ 61,599 $ 1,034 3.38 % $ 70,718 $ 66 0.19 % Investment Securities: Taxable Investment Securities 571,176 11,958 4.22 395,203 4,951 2.53 Tax-Exempt Investment Securities (1) 28,435 629 4.46 72,933 1,574 4.35 Total Investment Securities 599,611 12,587 4.23 468,136 6,525 2.81 Paycheck Protection Program Loans (2) 956 5 1.00 13,210 826 12.61 Loans (1)(2) 3,672,772 93,327 5.12 2,991,195 65,480 4.41 Total Loans 3,673,728 93,332 5.12 3,004,405 66,306 4.45 Federal Home Loan Bank Stock 24,639 828 6.77 8,667 113 2.63 Total Interest Earning Assets 4,359,577 107,781 4.99 % 3,551,926 73,010 4.15 % Noninterest Earning Assets 85,087 77,395 Total Assets $ 4,444,664 $ 3,629,321 Interest Bearing Liabilities: Deposits: Interest Bearing Transaction Deposits $ 570,964 $ 8,698 3.07 % $ 559,352 $ 1,291 0.47 % Savings and Money Market Deposits 952,865 13,547 2.87 901,102 2,103 0.47 Time Deposits 258,865 2,771 2.16 284,757 1,410 1.00 Brokered Deposits 820,651 14,356 3.53 405,282 1,810 0.90 Total Interest Bearing Deposits 2,603,345 39,372 3.05 2,150,493 6,614 0.62 Federal Funds Purchased 312,329 7,705 4.97 74,340 419 1.14 Notes Payable 13,750 548 8.03 — — — FHLB Advances 185,785 2,953 3.21 45,019 317 1.42 Subordinated Debentures 78,994 1,976 5.05 92,341 2,416 5.28 Total Interest Bearing Liabilities 3,194,203 52,554 3.32 % 2,362,193 9,766 0.83 % Noninterest Bearing Liabilities: Noninterest Bearing Transaction Deposits 786,009 852,648 Other Noninterest Bearing Liabilities 59,504 32,248 Total Noninterest Bearing Liabilities 845,513 884,896 Shareholders' Equity 404,948 382,232 Total Liabilities and Shareholders' Equity $ 4,444,664 $ 3,629,321 Net Interest Income / Interest Rate Spread 55,227 1.67 % 63,244 3.32 % Net Interest Margin (3) 2.55 % 3.59 % Taxable Equivalent Adjustment: Tax-Exempt Investment Securities and Loans (788 ) (534 ) Net Interest Income $ 54,439 $ 62,710 ______________________________ (1) Interest income and average rates for tax-exempt investment securities and loans are presented on a tax-equivalent basis, assuming a statutory federal income tax rate of 21%. (2) Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs. (3) Net interest margin includes the tax equivalent adjustment and represents the annualized results of: (i) the difference between interest income on interest earning assets and the interest expense on interest bearing liabilities, divided by (ii) average interest earning assets for the period. Bridgewater Bancshares, Inc. and Subsidiaries Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended For the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2023 2023 2022 2023 2022 Pre-Provision Net Revenue Noninterest Income $ 1,415 $ 1,943 $ 1,650 $ 3,358 $ 3,207 Less: (Gain) Loss on Sales of Securities (50 ) 56 (52 ) 6 (52 ) Less: FHLB Advance Prepayment Income — (299 ) — (299 ) — Total Operating Noninterest Income 1,365 1,700 1,598 3,065 3,155 Plus: Net Interest Income 25,872 28,567 32,530 54,439 62,710 Net Operating Revenue $ 27,237 $ 30,267 $ 34,128 $ 57,504 $ 65,865 Noninterest Expense $ 14,388 $ 14,183 $ 13,752 $ 28,571 $ 27,260 Less: Amortization of Tax Credit Investments (114 ) (114 ) (63 ) (228 ) (180 ) Total Operating Noninterest Expense $ 14,274 $ 14,069 $ 13,689 $ 28,343 $ 27,080 Pre-Provision Net Revenue $ 12,963 $ 16,198 $ 20,439 $ 29,161 $ 38,785 Plus: Non-Operating Revenue Adjustments 50 243 52 293 52 Less: Provision for Credit Losses 50 625 3,025 675 4,700 Non-Operating Expense Adjustments 114 114 63 228 180 Provision for Income Taxes 3,033 4,060 4,521 7,093 8,813 Net Income $ 9,816 $ 11,642 $ 12,882 $ 21,458 $ 25,144 Average Assets $ 4,483,662 $ 4,405,234 $ 3,743,575 $ 4,444,664 $ 3,629,321 Pre-Provision Net Revenue Return on Average Assets 1.16 % 1.49 % 2.19 % 1.32 % 2.16 % As of and for the Three Months Ended As of and for the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2023 2023 2022 2023 2022 Core Net Interest Margin Net Interest Income (Tax-Equivalent Basis) $ 26,280 $ 28,947 $ 32,806 $ 55,227 $ 63,244 Less: Loan Fees (941 ) (998 ) (2,030 ) (1,939 ) (3,773 ) Less: PPP Interest and Fees (3 ) (2 ) (263 ) (5 ) (826 ) Core Net Interest Income $ 25,336 $ 27,947 $ 30,513 $ 53,283 $ 58,645 Average Interest Earning Assets $ 4,395,050 $ 4,323,706 $ 3,671,748 $ 4,359,576 $ 3,551,926 Less: Average PPP Loans (913 ) (999 ) (8,335 ) (956 ) (13,210 ) Core Average Interest Earning Assets $ 4,394,137 $ 4,322,707 $ 3,663,413 $ 4,358,620 $ 3,538,716 Core Net Interest Margin 2.31 % 2.62 % 3.34 % 2.47 % 3.34 % Non-GAAP Financial Measures (dollars in thousands) (unaudited) For the Three Months Ended For the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2023 2023 2022 2023 2022 Efficiency Ratio Noninterest Expense $ 14,388 $ 14,183 $ 13,752 $ 28,571 $ 27,260 Less: Amortization of Intangible Assets (34 ) (48 ) (47 ) (82 ) (95 ) Adjusted Noninterest Expense $ 14,354 $ 14,135 $ 13,705 $ 28,489 $ 27,165 Net Interest Income 25,872 28,567 32,530 54,439 62,710 Noninterest Income 1,415 1,943 1,650 3,358 3,207 Less: (Gain) Loss on Sales of Securities (50 ) 56 (52 ) 6 (52 ) Adjusted Operating Revenue $ 27,237 $ 30,566 $ 34,128 $ 57,803 $ 65,865 Efficiency Ratio 52.7 % 46.2 % 40.2 % 49.3 % 41.2 % As of and for the Three Months Ended As of and for the Six Months Ended June 30, March 31, June 30, June 30, June 30, 2023 2023 2022 2023 2022 Tangible Common Equity and Tangible Common Equity/Tangible Assets Total Shareholders' Equity $ 409,126 $ 402,006 $ 374,883 Less: Preferred Stock (66,514 ) (66,514 ) (66,514 ) Total Common Shareholders' Equity 342,612 335,492 308,369 Less: Intangible Assets (2,832 ) (2,866 ) (3,009 ) Tangible Common Equity $ 339,780 $ 332,626 $ 305,360 Total Assets $ 4,603,185 $ 4,602,899 $ 3,883,264 Less: Intangible Assets (2,832 ) (2,866 ) (3,009 ) Tangible Assets $ 4,600,353 $ 4,600,033 $ 3,880,255 Tangible Common Equity/Tangible Assets 7.39 % 7.23 % 7.87 % Tangible Book Value Per Share Book Value Per Common Share $ 12.25 $ 12.05 $ 11.14 Less: Effects of Intangible Assets (0.10 ) (0.10 ) (0.11 ) Tangible Book Value Per Common Share $ 12.15 $ 11.95 $ 11.03 Return on Average Tangible Common Equity Net Income Available to Common Shareholders $ 8,802 $ 10,629 $ 11,868 $ 19,431 $ 23,117 Average Shareholders' Equity $ 406,347 $ 403,533 $ 381,448 $ 404,948 $ 382,232 Less: Average Preferred Stock (66,514 ) (66,514 ) (66,514 ) (66,514 ) (66,514 ) Average Common Equity 339,833 337,019 314,934 338,434 315,718 Less: Effects of Average Intangible Assets (2,846 ) (2,894 ) (3,037 ) (2,870 ) (3,060 ) Average Tangible Common Equity $ 336,987 $ 334,125 $ 311,897 $ 335,564 $ 312,658 Return on Average Tangible Common Equity 10.48 % 12.90 % 15.26 % 11.68 % 14.91 % Three Months Ended June 30, March 31, December 31, September 30, June 30, 2023 2023 2022 2022 2022 Tangible Common Equity Total Shareholders' Equity $ 409,126 $ 402,006 $ 394,064 $ 382,007 $ 374,883 Less: Preferred Stock (66,514 ) (66,514 ) (66,514 ) (66,514 ) (66,514 ) Common Shareholders' Equity 342,612 335,492 327,550 315,493 308,369 Less: Intangible Assets (2,832 ) (2,866 ) (2,914 ) (2,962 ) (3,009 ) Tangible Common Equity $ 339,780 $ 332,626 $ 324,636 $ 312,531 $ 305,360 View source version on businesswire.com: https://www.businesswire.com/news/home/20230725009497/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
