BRIDGEWATER BANC(BWBBP) - 2023 Q2 - Quarterly Report

Financial Performance - The Company reported financial results for the three and six months ended June 30, 2023, with annualized results not indicative of future performance[155]. - Net income for Q2 2023 was $9.8 million, down from$12.9 million in Q2 2022, with diluted earnings per share decreasing from $0.41 to$0.31[179]. - The company reported a diluted earnings per share of $0.69 for the six months ended June 30, 2023, down from$0.80 for the same period in 2022[179]. - Net income for the six months ended June 30, 2023, was $21.5 million, down from$25.1 million for the same period in 2022, a decrease of 14.3%[281]. - Adjusted operating revenue for the three months ended June 30, 2023, was $27,237,000, down from$30,566,000 in the previous quarter[1]. Income and Expenses - Net interest income for Q2 2023 was $25.9 million, compared to$32.9 million in Q2 2022, reflecting a decrease in net interest margin from 3.16% to 2.40%[178]. - Noninterest income for Q2 2023 was $1.4 million, a decrease of$235,000 from $1.7 million in Q2 2022, primarily due to lower letter of credit fees[216]. - Noninterest expense for Q2 2023 was$14.4 million, an increase of $636,000 from$13.8 million in Q2 2022, driven by higher FDIC insurance assessments[219]. - The efficiency ratio for Q2 2023 was 52.7%, compared to 43.8% in Q2 2022, indicating increased operational costs relative to income[177]. Assets and Liabilities - Total assets as of June 30, 2023, were $4.6 billion, an increase from$3.9 billion a year earlier[177]. - Total deposits reached $3.6 billion as of June 30, 2023, up from$3.2 billion a year earlier[177]. - Total interest earning assets increased to $4,395,051 thousand for the three months ended June 30, 2023, compared to$3,671,748 thousand for the same period in 2022, reflecting a growth of 19.7%[183]. - Total gross loans reached $3.74 billion at June 30, 2023, an increase of$166.8 million or 4.7% from $3.57 billion at December 31, 2022[228]. - The total allowance for credit losses was$50.7 million as of June 30, 2023[237]. Credit Quality - The allowance for credit losses on loans is a valuation account that reflects the net amount expected to be collected, with management making estimates based on current conditions and forecasts[163][166]. - Provision for credit losses was $50,000 in Q2 2023, compared to$3.0 million in Q2 2022, indicating improved credit quality[178]. - The provision for credit losses on loans was $2.1 million for the six months ended June 30, 2023, compared to$4.7 million for the same period in 2022[212]. - Loans classified as "watch" totaled $27.2 million at June 30, 2023, down from$32.3 million at December 31, 2022[245]. - Total nonperforming assets increased to $778,000 as of June 30, 2023, from$639,000 at December 31, 2022, representing a growth of 21.8%[247]. Risk Management - The Company faces various risks including interest rate fluctuations, economic conditions, and competition from nonbank entities[157][158]. - Management emphasizes the importance of effective risk management frameworks and the ability to attract and retain key personnel[157]. - The Company has entered into cash flow hedges with a total notional amount of $308.0 million as of June 30, 2023, to manage interest rate exposure[1]. - In a hypothetical scenario of a 400 basis point increase in interest rates, the company would experience a 7.68$409.1 million as of June 30, 2023, from $394.1 million at December 31, 2022, reflecting a$15.1 million increase[264]. - The Company’s total risk-based capital was $558.0 million with a ratio of 13.50$1.96 billion as of June 30, 2023, compared to $1.38 billion at December 31, 2022[276]. - Core deposits amounted to approximately$2.51 billion, accounting for 70.3% of total deposits as of June 30, 2023[278]. - The ratio of primary and secondary liquidity to total deposits improved to 54.8% as of June 30, 2023, up from 40.4% at December 31, 2022[277].