8-K: Bridgewater Bancshares Reports Strong Q4 2024 Results, Fueled by Acquisition and Core Deposit Growth

Bridgewater Bancshares announces positive Q4 2024 financial results, highlighting the acquisition of First Minnetonka City Bank and significant core deposit growth.

Summary

• Bridgewater Bancshares, Inc. reported a net income of $8.2 million, or $0.26 per diluted common share, for the fourth quarter of 2024.
• Adjusted net income for the quarter was $8.6 million, or $0.27 per diluted common share.
• The company completed the acquisition of First Minnetonka City Bank (FMCB) in 107 days following the announcement.
• Net interest income increased by $1.4 million, or 5.3%, from the third quarter of 2024.
• The net interest margin was 2.32% for the fourth quarter, an increase of eight basis points from the previous quarter.
• Core deposits increased by $428.2 million, or 63.6% annualized, from the third quarter; excluding FMCB, the increase was $210.9 million, or 31.3% annualized.
• Gross loans increased by $182.9 million, or 19.7% annualized, from the third quarter; excluding FMCB, the increase was $65.8 million, or 7.1% annualized.
• Annualized net loan charge-offs were 0.03% of average loans, compared to 0.10% for the third quarter.
• For the full year 2024, net income was $32.8 million, or $1.03 per diluted common share.
• Total deposits increased by $376.8 million, or 10.2%, in 2024, and core deposits increased by $559.4 million, or 22.0%.
• Gross loans increased by $144.2 million, or 3.9%, in 2024.
• The loan-to-deposit ratio was 94.7%, down from 100.4% at the end of 2023.
• Nonperforming assets to total assets were 0.01% for the year ended December 31, 2024, compared to 0.02% at December 31, 2023.
• Tangible book value per share was $13.49 at December 31, 2024, an increase of 5.1% from the previous year.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong growth in core deposits and loans, successful acquisition integration, and well-managed asset quality. While net income decreased slightly, the overall tone is optimistic and forward-looking.

Positives

• Net interest margin expanded to 2.32% in Q4 2024, primarily due to lower costs of deposits and increased balances in the securities and loan portfolios.
• Core deposit growth was very strong, and loan balances rebounded nicely as loan demand increased later in the year.
• The acquisition of First Minnetonka City Bank was completed in just 107 days after it was announced.
• Asset quality remained superb due to the company's measured risk selection, consistent underwriting standards, active credit oversight, and experienced lending and credit teams.
• Total onand off-balance sheet liquidity was $2.30 billion as of December 31, 2024.
• The company is well-positioned for recent Fed rate cuts.
• The company's efficiency ratio improved to 56.8% for the fourth quarter of 2024, compared to 58.0% for the third quarter of 2024, and 58.8% for the fourth quarter of 2023.

Negatives

• Net income decreased to $8.2 million in Q4 2024 from $8.7 million in Q3 2024 and $8.9 million in Q4 2023.
• Earnings per diluted common share decreased to $0.26 for Q4 2024 from $0.27 for Q3 2024 and $0.28 for Q4 2023.
• The Common Equity Tier 1 Risk-Based Capital Ratio decreased to 9.08% at December 31, 2024, compared to 9.79% at September 30, 2024.
• Tangible book value per share decreased by 3.4% from $13.96 as of September 30, 2024, to $13.49 as of December 31, 2024.

Risks

• The company acknowledges risks related to interest rate changes, economic conditions, credit risk, liquidity risk, competition, cybersecurity incidents, and potential impacts from climate change and geopolitical events.
• The company faces risks associated with the integration of First Minnetonka City Bank, including potential difficulties and expenses.
• The company's forward-looking statements are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict and many of which are outside of the company's control.

Future Outlook

The company anticipates mid-to-high single-digit loan growth, modest NIM expansion, high-teen noninterest expense growth, and modest capital ratio expansion in 2025. The company will continue to evaluate potential share repurchases.

Management Comments

• Bridgewater finished the year with positive momentum as the fourth quarter saw robust balance sheet growth, net interest margin expansion, superb asset quality, and the closing of our acquisition of First Minnetonka City Bank, said Chairman and Chief Executive Officer, Jerry Baack.
• Core deposit growth was very strong and loan balances rebounded nicely as loan demand increased later in the year.
• We were also pleased to see margin expansion during the quarter as our balance sheet was well-positioned for recent Fed rate cuts.
• We believe this acquisition, coupled with the strong core deposit growth and increased liquidity generated in 2024, will allow us to be more offensive-minded and return to more normalized levels of profitable growth in 2025.

Industry Context

The announcement reflects a trend of community banks focusing on strategic acquisitions and organic growth to enhance profitability and market share. The emphasis on core deposit growth and efficient expense management aligns with industry best practices in a changing interest rate environment.

Comparison to Industry Standards

• The company's efficiency ratio of 56.8% is better than the peer median of 61% for publicly-traded banks with total assets between $3 billion and $10 billion as of September 30, 2024.
• The company's allowance for credit losses to total loans of 1.35% is well-reserved compared to the peer median of 1.11%.
• The company's AOCI / Total Risk-Based Capital of 2.3% is better than the peer bank median of 5.7%.

Stakeholder Impact

• Shareholders will benefit from the company's continued growth and profitability, as well as the quarterly cash dividend on the Series A Preferred Stock.
• Employees will benefit from the company's investments in people and technology initiatives.
• Customers will benefit from the company's expanded branch footprint and upgraded online banking solutions.
• The company's strong financial performance and commitment to the community will benefit the local economy.

Next Steps

• The company will host a conference call on January 30, 2025, to discuss the fourth quarter 2024 financial results.
• The company will continue to focus on profitable growth, aligning loan growth with core deposit growth, and maintaining strong credit quality.
• The company will evaluate additional M&A opportunities that support its business model and growth outlook.

Key Dates