Bridgewater Bank(US:BWB)2023-04-29 15:29Financial Data and Key Metrics Changes - The company reported earnings of $0.37 per share for Q1 2023, reflecting moderated balance sheet growth and margin pressure [8][22] - The net interest margin declined by 44 basis points to 2.72% due to increasing funding costs outpacing earning asset yields [10][29] - Non-interest income increased by 11.8% from the previous quarter, primarily driven by higher letter of credit fees [30] Business Line Data and Key Metrics Changes - Loan balances grew at an annualized pace of 13%, primarily driven by advances on existing loans, while new loan originations decreased by 69% year-over-year [25][42] - Deposit growth was relatively flat, with a focus on deposit retention due to market dynamics [14][40] - The efficiency ratio remained strong at 46.2%, aided by controlled expenses which declined by 6.7% from the previous quarter [13][29] Market Data and Key Metrics Changes - The company experienced a shift in deposit mix from non-interest bearing to interest-bearing accounts, reflecting broader industry trends [10][40] - The cycle-to-date deposit beta was reported at 40%, indicating a moderate increase in deposit costs [16][48] Company Strategy and Development Direction - The company aims to align loan growth with core deposit growth, focusing on better managing expenses and maintaining strong client relationships [32][91] - The strategic priority includes managing high-quality balance sheet growth and investing in business scalability [94][108] - The company is exploring potential M&A opportunities while maintaining a conservative capital approach in the current environment [89][92] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current banking environment, emphasizing the importance of client relationships and risk management [22][24] - The outlook for loan growth remains in the high single to low double-digit range for 2023, with expectations of continued margin pressure [91][92] - Management acknowledged the challenges posed by the recent banking disruptions but remains optimistic about gaining market share [22][24] Other Important Information - The company has a strong capital and liquidity position, with available liquidity of $1.9 billion, more than twice the level of uninsured deposits [23][86] - The adoption of CECL resulted in a $650,000 increase in the allowance for credit losses, impacting retained earnings [80][81] Q&A Session Summary Question: Deposit flows in April and expectations for Q2 - Management noted that the momentum from March continued into early April, but typical seasonality around tax time caused some balances to decline [46][47] Question: Insights on capital and M&A opportunities - Management indicated that the current environment is challenging for M&A, but they are maintaining conversations with potential sellers for future opportunities [56][89] Question: Strategies for deposit growth and diversification - The company is focusing on growing its commercial and industrial (C&I) book to attract larger deposit balances and enhance non-interest income [60][62] Question: Impact of CECL on provisions and credit quality - Management confirmed an increase in classified assets due to a downgrade in a CRE loan, but overall asset quality remains strong with low non-performing assets [78][81]