Bridgewater Bank(US:BWB)2023-11-01 16:00PART I FINANCIAL INFORMATION This part presents the company's unaudited financial statements, management's analysis, market risk disclosures, and control procedures Consolidated Financial Statements (unaudited) Presents the unaudited consolidated financial statements and notes, highlighting the adoption of the CECL accounting standard Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2023 (Unaudited) | Dec 31, 2022 | | :--- | :--- | :--- | | Total Assets | $4,557,070 | $4,345,662 | | Total Loans, Net | $3,664,464 | $3,512,157 | | Total Liabilities | $4,141,110 | $3,951,598 | | Total Deposits | $3,675,509 | $3,416,543 | | Total Shareholders' Equity | $415,960 | $394,064 | Consolidated Statements of Income Income Statement Highlights (in thousands, except per share) | Metric (in thousands, except per share) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $25,421 | $34,095 | $79,860 | $96,805 | | Provision for Credit Losses | ($600) | $1,500 | $75 | $6,200 | | Net Income | $9,629 | $14,513 | $31,087 | $39,657 | | Diluted EPS | $0.30 | $0.47 | $0.99 | $1.27 | Consolidated Statements of Comprehensive Income Comprehensive Income Highlights (in thousands) | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $9,629 | $14,513 | $31,087 | $39,657 | | Total Other Comprehensive Loss, Net of Tax | ($2,858) | ($5,659) | ($5,824) | ($25,726) | | Comprehensive Income | $6,771 | $8,854 | $25,263 | $13,931 | Consolidated Statements of Shareholders' Equity - Total Shareholders' Equity increased from $394.1 million at December 31, 2022, to $416.0 million at September 30, 2023, driven by net income and partially offset by the CECL adoption and other comprehensive loss1618 Consolidated Statements of Cash Flows Cash Flow Summary (in thousands) | Cash Flow Activity (Nine Months Ended Sep 30) | 2023 | 2022 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $38,483 | $80,369 | | Net Cash Used in Investing Activities | ($168,277) | ($734,430) | | Net Cash Provided by Financing Activities | $167,109 | $586,084 | | Net Change in Cash and Cash Equivalents | $37,315 | ($67,977) | Notes to Consolidated Financial Statements - The Company adopted the CECL accounting standard on January 1, 2023, resulting in a net decrease to retained earnings of $3.9 million5664 - The securities available for sale portfolio had a fair value of $553.1 million and gross unrealized losses of $63.3 million as of September 30, 2023, which management attributes to interest rate changes7479 - Total gross loans were $3.72 billion as of September 30, 2023, with an Allowance for Credit Losses (ACL) of $50.6 million, representing 1.36% of total gross loans85166 - The Company and the Bank met all regulatory capital requirements, with a consolidated Total Risk-based Capital ratio of 13.88% as of September 30, 2023202206 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses decreased net income and margin compression due to higher funding costs, alongside strong loan and asset growth Operating Results Overview Key Performance Metrics (in thousands, except per share) | Metric (in thousands, except per share) | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $9,629 | $14,513 | $31,087 | $39,657 | | Diluted EPS | $0.30 | $0.47 | $0.99 | $1.27 | | Net Interest Income | $25,421 | $34,095 | $79,860 | $96,805 | - The net interest margin (tax-equivalent) declined to 2.32% in Q3 2023 from 3.53% in Q3 2022, primarily due to higher funding costs in the rising interest rate environment286 - Noninterest expense increased to $15.4 million in Q3 2023 from $14.2 million in Q3 2022, mainly due to higher FDIC insurance assessments and derivative collateral fees135 Financial Condition - Total assets grew to $4.56 billion at September 30, 2023, a 4.9% increase from December 31, 2022, driven by strong organic loan growth144 - Total gross loans reached $3.72 billion at September 30, 2023, a 4.3% increase from year-end 2022, with growth moderated by active balance sheet management145 - Total deposits increased by 7.6% to $3.68 billion from year-end 2022, supported by inflows of core deposits and supplemental funding from brokered deposits363364 Asset Quality - Asset quality remained strong, with nonperforming loans at $749,000, representing just 0.02% of total loans as of September 30, 2023332333 - The allowance for credit losses on loans was $50.6 million, or 1.36% of total loans, at September 30, 2023, compared to $48.0 million, or 1.34%, at year-end 2022360 Liquidity and Capital Resources - The company maintained a strong liquidity position with total on- and off-balance sheet liquidity of $2.18 billion as of September 30, 2023, without utilizing the BTFP or Discount Window354 - Total shareholders' equity increased to $416.0 million at September 30, 2023, from $394.1 million at year-end 2022, driven by retained earnings371 - The company and the Bank remained well-capitalized, with all regulatory capital ratios exceeding minimum requirements, including a consolidated Tier 1 Leverage Ratio of 9.62%348350 Quantitative and Qualitative Disclosures About Market Risk The company manages its primary market risk, interest rate risk, using NII simulation models and hedging instruments - The company's main market risk is interest rate risk, managed through strategies overseen by its Asset Liability Management (ALM) Committee404387 - To mitigate interest rate exposure, the company utilizes cash flow hedges, including interest rate swaps and caps, with a total notional amount of $308.0 million at September 30, 2023390 Net Interest Income (NII) Sensitivity Analysis | Interest Rate Change (bps) | Forecasted NII Change (12-Month) | | :--- | :--- | | +400 | (1.69)% | | +200 | (1.14)% | | 0 | 0.00% | | -100 | +2.45% | | -300 | +7.23% | Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of September 30, 2023324 - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls325 PART II OTHER INFORMATION This part covers legal proceedings, risk factors, equity securities transactions, and other required disclosures Legal Proceedings The company is not party to any material pending legal proceedings outside of ordinary business litigation - The company reports no material pending legal proceedings outside of ordinary routine litigation327 Risk Factors No material changes to previously disclosed risk factors were reported for the period - No material changes to the risk factors disclosed in the company's 2022 Form 10-K were reported328 Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities The company did not repurchase shares under its authorized program during the third quarter of 2023 - The company has a board-approved stock repurchase program authorizing up to $25.0 million of its common stock, which expires on August 16, 2024306 - During the third quarter of 2023, no shares were repurchased under the publicly announced plan, though 1,078 shares were withheld for tax purposes related to vesting of restricted stock308 Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - None reported312 Mine Safety Disclosures This disclosure requirement is not applicable to the company's operations - Not applicable313 Other Information No directors or executive officers adopted or terminated Rule 10b5-1 trading plans during the quarter - No directors or executive officers adopted or terminated any Rule 10b5-1 trading plans during the third quarter of 2023314 Exhibits This section lists the exhibits filed with the report, including Sarbanes-Oxley certifications and XBRL data - The report includes certifications from the CEO and CFO as required by the Sarbanes-Oxley Act, as well as financial statements formatted in inline XBRL315