8-K: Bridgewater Bancshares Reports $8.1 Million Net Income for Second Quarter 2024, Extends Stock Repurchase Program

Bridgewater Bancshares announced a net income of $8.1 million for the second quarter of 2024, alongside an extension of its stock repurchase program.

Summary

• Bridgewater Bancshares, Inc. reported a net income of $8.1 million for the second quarter of 2024, an increase from $7.8 million in the previous quarter but down from $9.8 million in the same quarter of 2023.
• Diluted earnings per common share were $0.26 for the second quarter of 2024, compared to $0.24 in the first quarter of 2024 and $0.31 in the second quarter of 2023.
• The company's tangible book value per share increased to $13.53, a 9.8% annualized increase from the first quarter of 2024.
• Net interest income rose by $365,000, or 1.5%, from the first quarter of 2024, marking the first quarter-over-quarter increase since the third quarter of 2022.
• The net interest margin remained stable at 2.24% for the second quarter of 2024, consistent with the first quarter of 2024.
• Gross loans increased by $16.2 million, or 1.7% annualized, from the first quarter of 2024, while deposits increased by $487,000, or 0.1% annualized.
• The company repurchased 252,707 shares of common stock at a weighted average price of $11.48 per share, totaling $2.9 million.
• The Board of Directors extended the stock repurchase program expiration date to August 20, 2025, with $15.3 million remaining under the authorization.
• A quarterly cash dividend of $36.72 per share of preferred stock, equivalent to $0.3672 per depository share, was declared, payable on September 3, 2024.

Sentiment

Score: 7

Explanation: The sentiment is positive due to the company's stable net interest margin, strong asset quality, and continued tangible book value growth. However, there are some concerns about the decrease in net income compared to the previous year and the increase in deposit costs, which temper the overall sentiment.

Positives

• The company experienced positive profitability momentum with increases in total revenue and net interest income.
• Net interest margin held steady as loan portfolio repricing increased.
• Asset quality remained strong with low nonperforming assets.
• The company has achieved 30 consecutive quarters of tangible book value per share growth.
• The company's loan portfolio yield increased to 5.50% in the second quarter of 2024.
• The company's liquidity position is strong with $2.22 billion in total onand off-balance sheet liquidity.
• The company's Common Equity Tier 1 Risk-Based Capital Ratio increased to 9.41%.

Negatives

• Net income was lower compared to the second quarter of 2023.
• The cost of total deposits increased to 3.46% in the second quarter of 2024.
• The efficiency ratio increased to 58.7% from 58.2% in the previous quarter.
• Core deposits decreased by $52.7 million from the first quarter of 2024.
• The loan portfolio growth was moderated in the second quarter due to increased loan payoffs.

Risks

• The company faces interest rate risk, including the effects of sustained high interest rates.
• Fluctuations in the values of securities held in the portfolio could impact results.
• Business and economic conditions, including inflation and possible recession, pose risks.
• The company is exposed to risks related to loan concentrations and the overall health of the real estate market.
• The company faces competition in the financial services industry.
• Cybersecurity incidents and interruptions to information technology systems are potential risks.
• The company is subject to legislative and regulatory changes.

Future Outlook

The company expects low-to-mid-single digit loan growth for the full year 2024 and aims to align loan growth with core deposit growth. They anticipate continued net interest margin stabilization and are positioned to benefit from potential rate cuts. Noninterest expense is expected to grow in line with asset growth, and provision expense will align with loan growth and asset quality. The company will continue to evaluate share repurchases based on valuation and capital levels.

Management Comments

• Bridgewater saw positive profitability momentum during the second quarter as total revenue and net interest income both increased for the first time since the third quarter of 2022, said Chairman and Chief Executive Officer, Jerry Baack.
• We were pleased to see net interest margin hold steady as loan portfolio repricing increased.
• The pace of balance sheet growth year-to-date remained on track with expectations, despite more moderated growth in the second quarter.
• Asset quality was superb once again as our Twin Cities-focused commercial real estate and multifamily portfolios continued to perform well despite a challenging environment.
• Our ongoing focus on executing on our business model, serving our clients, and driving shareholder value over time, have now resulted in 30 consecutive quarters of tangible book value per share growth.

Industry Context

This announcement comes amid a challenging environment for the banking sector, with concerns about interest rates, deposit growth, and asset quality. Bridgewater's results show resilience in maintaining net interest margin and asset quality, which is a positive sign compared to some peers. The company's focus on the Twin Cities market and its strong multifamily portfolio are also notable in the current economic climate.

Comparison to Industry Standards

• Bridgewater's tangible book value per share growth of 199% since 4Q16 significantly outperforms the peer bank average of 66%.
• The company's efficiency ratio of 58.7% is better than the peer median of 63% in 1Q24.
• Bridgewater's allowance for credit losses to total loans of 1.37% is well-reserved compared to the peer median of 1.13%.
• The company's nonperforming assets to total assets ratio of 0.01% is very low compared to industry averages.
• Bridgewater's AOCI / Total RBC of 2.6% is favorable compared to the peer bank median of 8.4%.

Stakeholder Impact

• Shareholders will benefit from the continued growth in tangible book value per share and the extension of the stock repurchase program.
• Employees will benefit from the company's continued investment in people and technology.
• Customers will benefit from the company's focus on providing responsive service and a range of deposit, lending, and treasury management solutions.
• Creditors will be reassured by the company's strong liquidity position and capital ratios.

Next Steps

• The company will host a conference call on July 25, 2024, to discuss the second quarter 2024 financial results.
• The company will continue to monitor the loan portfolio for signs of credit weakness.
• The company will continue to evaluate share repurchases based on valuation and capital levels.

Key Dates

Keywords

Bridgewater Bancshares, financial results, net income, earnings per share, stock repurchase, dividends, net interest margin, loan growth, deposit growth, asset quality, tangible book value, capital ratios