Bridgewater Bank(US:BWB)2023-07-28 22:37Financial Data and Key Metrics Changes - The company experienced a strong rebound in total deposit growth, which increased nearly 20% on an annualized basis from the first quarter, while core deposit balances increased 7.4%, outpacing loan growth of 5.6% [7][15] - The net interest margin declined 32 basis points to $2.40, but the pace of margin compression slowed considerably on a month-over-month basis throughout the quarter [38][24] - Tangible book value grew over 10% year-over-year, marking consistent growth every quarter since 2016 [25][60] Business Line Data and Key Metrics Changes - Loan growth in the second quarter moderated to 5.6% annualized, with year-to-date growth at 9.4% annualized [42] - Noninterest income declined from the first quarter, primarily due to the absence of FHLB prepayment income and lower letter of credit fees [13] - The company reported no net charge-offs for the tenth consecutive quarter, with nonperforming assets at just 0.02% of total assets [44] Market Data and Key Metrics Changes - The company’s loan-to-deposit ratio improved to 104%, back within the target range of 95% to 105% [32] - Only 22% of deposits were uninsured at the end of the second quarter, down from 38% at the end of the previous year [16] Company Strategy and Development Direction - The company is focused on enhancing its branch footprint and expanding its commercial and industrial (C&I) function over time [51] - The management emphasized the importance of staying in front of clients and has been proactive in developing relationships, particularly with women decision-makers [9][10] - The company is also exploring potential M&A opportunities while maintaining a conservative approach to capital management [61] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the team and the company’s ability to navigate the current challenging banking environment [10] - The company anticipates that loan growth will remain below historical levels in the near term but sees opportunities to ramp up growth as the environment becomes more favorable [33] - Management noted that the pace of margin compression is expected to continue slowing in the latter half of the year, depending on interest rate trends [49] Other Important Information - The company has nearly $2 billion of on- and off-balance sheet liquidity, which is 2.5 times the level of uninsured deposits [46] - The company is focused on building its capital ratios over time, with CET1 increasing from 8.48% to 8.72% during the quarter [47] Q&A Session Summary Question: What is the margin outlook for the next quarter? - Management indicated that while it is difficult to project precise numbers, they are pleased with the trends and expect continued moderation in margin compression [68] Question: Can you discuss the deposit costs and beta? - The spot rate on the deposit side was reported at 2.86, and management expressed satisfaction with the current beta levels [75] Question: How does the company view commercial real estate risks? - Management acknowledged that regulators are concerned about commercial real estate but emphasized their strong underwriting practices and the specific circumstances of their portfolio [81][108]