Bridgewater Bank(BWB) - 2024 Q3 - Quarterly Report

Merger and Acquisition - The Company announced a definitive merger agreement to acquire First Minnetonka City Bank in an all-cash transaction [147]. - The acquisition is expected to close in Q4 2024, with the combined organization projected to have approximately $4.9 billion in total assets,$ 4.0 billion in deposits, and $3.9 billion in loans and leases [148]. - The Company has received all necessary regulatory approvals for the merger transaction [148]. - The merger will result in nine full-service branches across the Twin Cities [148]. Financial Performance - Net Interest Income for September 30, 2024, was$ 25,599,000, an increase from $25,421,000 for September 30, 2023, representing a growth of 0.7% year-over-year [151]. - Net Income for the quarter ended September 30, 2024, was$ 8,675,000, compared to $9,629,000 for the same period last year, reflecting a decrease of 9.9% [151]. - Basic Earnings Per Share (EPS) increased to$ 0.28 for September 30, 2024, up from $0.31 for September 30, 2023, a decline of 9.7% [151]. - Total Assets as of September 30, 2024, were$ 4,691,517,000, slightly up from $4,557,070,000 a year earlier, indicating a growth of 2.9% [151]. - Total Loans, Gross, decreased to$ 3,685,590,000 from $3,722,271,000 year-over-year, a decline of 1.0% [151]. - Total Shareholders' Equity increased to$ 452,200,000 from $415,960,000, showing a growth of 8.7% year-over-year [151]. - Return on Average Assets improved to 0.73% for the quarter, compared to 0.85% for the same quarter last year [151]. - Return on Average Shareholders' Equity was 7.79% for September 30, 2024, up from 9.23% a year ago, indicating a decrease in profitability [151]. Credit Quality and Risk Management - The Company emphasizes the importance of managing credit risk and maintaining an adequate level of allowance for credit losses on loans [142]. - Nonperforming loans increased to$ 8.4 million, representing 0.23% of total loans, compared to $0.02% in the previous year [152]. - The allowance for credit losses on loans to nonaccrual loans was 608.95% [156]. - The allowance for credit losses was$ 51,018 thousand, reflecting a focus on maintaining asset quality [212][219]. - The Company emphasizes credit quality, with a focus on managing classified and nonperforming assets [219]. - The Company acknowledges the inherent uncertainties and risks associated with forward-looking statements regarding future performance [144]. Deposits and Liquidity - Total deposits as of September 30, 2024, were $3.75 billion, an increase of$ 37.5 million, or 1.0%, compared to $3.71 billion at December 31, 2023 [233]. - Core deposits increased by$ 131.2 million, or 6.9% annualized, from December 31, 2023, primarily due to increased balances from existing clients and new client acquisitions [233]. - Total brokered deposits decreased by $123.5 million to$ 901.0 million as of September 30, 2024, compared to $1.02 billion at December 31, 2023 [235]. - The ratio of Primary Liquidity to Total Deposits improved to 18.3% as of September 30, 2024, compared to 14.3% at December 31, 2023 [258]. Interest Rate Risk Management - The Company has a total notional amount of$ 308.0 million in cash flow hedges as of September 30, 2024, aimed at managing interest rate exposure [271]. - In a scenario of a 400 basis point increase in interest rates, the Company would experience a 6.58% decrease in net interest income as of September 30, 2024 [275]. - The Company anticipates a potential 11.10% increase in net interest income with an immediate 300 basis point decrease in interest rates [275]. - The Company’s risk management infrastructure includes limits and management targets for net interest income simulation, ensuring proactive interest rate risk management [268]. - The Company does not engage in speculative trading activities related to interest rates, foreign exchange rates, or commodities, focusing instead on risk management [269]. Operational Efficiency - The efficiency ratio for Q3 2024 was 58.0%, compared to 56.1% for Q3 2023, indicating a decline in operational efficiency [199]. - The Company reported a Tangible Common Equity of $382,897,000 as of September 30, 2024, compared to$ 369,930,000 as of June 30, 2024, an increase of 3.4% [266]. - The Efficiency Ratio for September 30, 2024, improved to 58.0% from 58.7% for June 30, 2024, reflecting enhanced operational efficiency [266].