Bridgewater Bank(BWB) - 2021 Q4 - Annual Report

PART I Business Bridgewater Bancshares, Inc. is a Minnesota-based financial holding company focused on commercial real estate lending, with assets of $3.48 billion as of December 31, 2021 Financial Highlights as of December 31, 2021 | Metric | Amount (Billions) | |------------------------|-------------------| | Total Assets | $3.48 | | Total Gross Loans | $2.82 | | Total Deposits | $2.95 | | Total Shareholders' Equity | $0.379 | - The company has grown significantly since its inception in 2005, driven primarily by organic growth in commercial real estate lending, with assets surpassing $3.0 billion in 2021[17] - Operating in the competitive Twin Cities MSA, the company ranked ninth in deposit market share with approximately 1.2% as of June 30, 2021[23][25] - The company's lending activities are concentrated in commercial real estate, with a particular expertise in multifamily financing, which has historically represented 20-30% of the loan portfolio[28] - The Bank is deemed to have a concentration in Commercial Real Estate (CRE) lending, with CRE and development loans representing 483.4% of its total capital as of December 31, 2021, requiring heightened risk management practices[131] Risk Factors The company faces significant credit, liquidity, operational, and market risks, primarily from commercial real estate loan concentration and non-core funding - A significant portion of the loan portfolio consists of commercial real estate loans, representing 71.3% of the total gross loan portfolio and 483.4% of the Bank's total risk-based capital at year-end 2021, exposing the company to risks in real estate values[145] - The company has a high concentration of large loans, with the 10 largest borrowing relationships accounting for approximately 19.2% of the total gross loan portfolio as of December 31, 2021[169] - There is a high concentration of large depositors, with the 10 largest depositor relationships accounting for approximately 17.1% of total deposits, posing a liquidity risk if these clients withdraw their funds[189] - The company depends on non-core funding sources, including $369.3 million in brokered deposits, which represented 12.5% of total deposits as of December 31, 2021[184][185] - The ongoing COVID-19 pandemic poses a material risk, potentially impacting clients' ability to fulfill financial obligations, increasing delinquencies, and negatively affecting regional economic conditions[330][331][332] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[335] Properties The company's corporate headquarters is located in St. Louis Park, Minnesota, operating seven full-service branch offices within the Twin Cities MSA, with three owned and four leased - The company operates a total of seven full-service branch offices in the Twin Cities MSA[336] - Of the seven branch locations, three are owned by the company and four are operated under lease agreements[337] Legal Proceedings The company is not a party to any material pending legal proceedings, other than ordinary routine litigation incidental to its business - Neither the Company nor its subsidiaries are party to any material pending legal proceedings outside of ordinary routine litigation[339] Mine Safety Disclosures This item is not applicable to the company - Not applicable[340] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq, with a $40.0 million stock repurchase program active, and future common stock dividends are not anticipated - The company's common stock and depository shares are traded on the Nasdaq Stock Market under the symbols "BWB" and "BWBBP", respectively[342] - A stock repurchase program authorized up to $40.0 million is effective through October 27, 2022, with approximately $12.4 million remaining available for repurchases as of the end of Q4 2021[347][345] - The company does not anticipate paying dividends on its common stock in the foreseeable future, intending to retain earnings to support operations and growth[351] Selected Financial Data This section has been intentionally omitted as permitted by recent SEC rule amendments designed to modernize and simplify financial disclosure requirements - The information previously required by this item has been intentionally omitted as permitted by SEC rule amendments[356] Management's Discussion and Analysis of Financial Condition and Results of Operations In 2021, net income rose 68.0% to $45.7 million, driven by increased net interest income and reduced loan loss provisions, with total assets growing 18.8% to $3.48 billion Year-over-Year Performance Comparison (2021 vs. 2020) | Metric | 2021 | 2020 | % Change | |-----------------------------|-------------------|-------------------|----------| | Net Income | $45.7 million | $27.2 million | +68.0% | | Diluted EPS | $1.54 | $0.93 | +64.8% | | Net Interest Income | $109.5 million | $88.0 million | +24.5% | | Provision for Loan Losses | $5.2 million | $12.8 million | -59.4% | | Total Assets (Year-End) | $3.48 billion | $2.93 billion | +18.8% | | Total Gross Loans (Year-End)| $2.82 billion | $2.33 billion | +21.2% | - Net interest margin expanded to 3.54% in 2021 from 3.46% in 2020, benefiting from lower deposit costs and accelerated recognition of PPP loan fees[395] - Asset quality remained strong, with nonperforming assets at $0.722 million or 0.02% of total assets, at year-end 2021[464] - Total deposits grew by 17.8% to $2.95 billion, with a significant 30.2% increase in noninterest-bearing deposits, which comprised 29.7% of total deposits at year-end 2021[477] - Shareholders' equity increased by 42.9% to $379.3 million, primarily due to retained earnings and the net issuance of $66.5 million in preferred stock[491][490] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk, managed by its ALM Committee using $235.0 million in derivatives, with a 100 basis point rate increase projected to raise net interest income by 0.55% - The company's primary market risk is identified as interest rate risk, which is the risk of loss to net interest income due to changes in interest rates[526] - To mitigate interest rate risk, the company utilizes cash flow hedges, including interest rate swaps and caps, with a total notional amount of $235.0 million as of December 31, 2021[529] Net Interest Income Sensitivity Analysis (as of Dec 31, 2021) | Change in Interest Rates (bps) | Projected % Change in Net Interest Income | |--------------------------------|-------------------------------------------| | +400 | +5.75% | | +200 | +2.15% | | +100 | +0.55% | | -100 | -2.71% | Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for Bridgewater Bancshares, Inc. for the three years ended December 31, 2021, receiving an unqualified opinion - The independent registered public accounting firm, CliftonLarsonAllen LLP, issued an unqualified audit opinion on the consolidated financial statements[538] - The Consolidated Balance Sheet as of December 31, 2021, reports total assets of $3.478 billion and total liabilities of $3.098 billion[546][543] - The Consolidated Statement of Income for the year ended December 31, 2021, shows Net Interest Income of $109.51 million and Net Income of $45.69 million[551] - Note 5 details the loan portfolio composition, with Real Estate Mortgage loans comprising the largest segment at $2.145 billion as of December 31, 2021[666] - Note 20 confirms that as of December 31, 2021, both the Company and the Bank's capital ratios exceeded the minimum requirements to be considered well-capitalized under regulatory guidelines[758] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[809] Controls and Procedures Management concluded the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2021 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[810] - Management asserts that the company maintained effective internal control over financial reporting as of December 31, 2021, based on the COSO framework[815] - There were no changes in internal control over financial reporting during the fiscal year that materially affected, or are reasonably likely to materially affect, the company's internal controls[817] Other Information The company reports no other information for this item - None[818] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable[819] PART III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the company's definitive Proxy Statement for its 2022 Annual Meeting of Shareholders - Information is incorporated by reference from the definitive proxy statement to be filed within 120 days of the fiscal year end[821] Executive Compensation Information on executive and director compensation is incorporated by reference from the company's definitive Proxy Statement for its 2022 Annual Meeting of Shareholders - Information is incorporated by reference from the definitive proxy statement to be filed within 120 days of the fiscal year end[822] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section details equity compensation plans, showing 2,113,653 securities to be issued and 677,275 available for future issuance as of December 31, 2021 Equity Compensation Plan Information as of December 31, 2021 | Plan Category | Securities to be Issued Upon Exercise | Weighted-Average Exercise Price | Securities Remaining for Future Issuance | |------------------------------------------------|---------------------------------------|---------------------------------|------------------------------------------| | Equity compensation plans approved by shareholders | 2,113,653 | $7.67 | 677,275 | Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence is incorporated by reference from the company's definitive Proxy Statement for its 2022 Annual Meeting of Shareholders - Information is incorporated by reference from the definitive proxy statement to be filed within 120 days of the fiscal year end[827] Principal Accounting Fees and Services Information detailing fees paid to the principal accountant is incorporated by reference from the company's definitive Proxy Statement for its 2022 Annual Meeting of Shareholders - Information is incorporated by reference from the definitive proxy statement to be filed within 120 days of the fiscal year end[828] PART IV Exhibits and Financial Statement Schedules This section lists financial statements from Item 8 and provides a comprehensive list of all exhibits filed with the Form 10-K - The consolidated financial statements from Item 8 are incorporated by reference[832] - A detailed list of exhibits filed with the report is provided, including articles of incorporation, bylaws, indentures, employment agreements, and various certifications[832][833][834] Form 10-K Summary The company did not provide a summary for this item - None[837]