Bridgewater Bancshares, Inc. · NASDAQ:BWB
Bridgewater Bancshares — Q4 2023 Earnings Presentation
29 slides from Bridgewater Bancshares's earnings presentation, Jan 25, 2024
Slide 1: Earnings Presentation Fourth Quarter 2023
I EARNINGS PRESENTATION FOURTH QUARTER 2023 1S Bripcewarer BANCSHARES, INC.
Slide 2: Disclaimer
Disclaimer Forward-Looking Statements This presentation contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, statements concerning plans, estimates,
Slide 3: 4Q23 Earnings Highlights
4Q23 Earnings Highlights Diluted Return on Return on Avg. Tangible Efficiency Nonperforming Assets EPS Average Assets Common Equity1 Ratio1 to Total Assets $0.28 0.77% 8.95% 58.8% 0.02% • Net interest margin (NIM) of 2.27%, down 5 bps from 3Q23 Net Interest Margin • December 2023 NIM of 2.30%, flat
Slide 4: Consistent Tangible Book Value Per Share Outperformance
Consistent Tangible Book Value Per Share Outperformance Tangible Book Value Per Share1 Growth for 28 Consecutive Quarters 200% 183% 150% 100% 53% 50% 0% 1Q17 2Q17 1Q18 2Q18 1Q19 2Q19 1Q20 2Q20 1Q21 2Q21 1Q22 2Q22 1Q23 2Q23 4Q16 4Q17 4Q18 4Q19 4Q20 4Q21 4Q22 4Q23 3Q17 3Q18 3Q19 3Q20 3Q21 3Q22 3Q23 BW
Slide 5: Net Interest Income and Margin Continue to Stabilize
Net Interest Income and Margin Continue to Stabilize Net Interest Income and Margin Trends Net Interest Margin Drivers 3.16% 2.72% 2.40% 2.32% 2.27% 3.05% 2.62% 2.31% 2.24% 2.21% $32,893 $1,100 Core NIM2 down 3 bps $28,567 $998 $25,872 $25,421 $25,314 $941 $914 $751 Net Interest Income / Net Interes
Slide 6: Rising Funding Costs Slow as Asset Yields Move Higher
Rising Funding Costs Slow as Asset Yields Move Higher Loan Portfolio Repricing Higher as Growth Moderates High-Yielding Securities Portfolio 5.26% 5.33% 4.63% 5.06% 5.19% 4.39% 4.87% 4.22% 4.24% 3.91% 5.16% 5.25% 5.09% 4.75% 4.95% $630 $608 $604 $595 $595 $3,482 $3,630 $3,717 $3,723 $3,726 4Q22 1Q23
Slide 7: Revenue Trends Impacted by Current Interest Rate Environment
Revenue Trends Impacted by Current Interest Rate Environment Continued Profitability in the Current Environment Spread-Based Revenue Model 1.82% 1.49% 1.16% 1.01% 0.96% $34,631 1.28% $1,738 1.07% $30,510 0.88% 0.85% $19,512 0.77% $1,943 $27,287 $27,147 $26,723 $1,415 $1,726 $1,409 $16,198 $13,735 $1
Slide 8: Well-Controlled Expenses in 2023
Well-Controlled Expenses in 2023 Highly Efficient Business Model Despite Recent Revenue Pressures 2023 NIE Growth Below Asset Growth Industry median efficiency ratio of 62%1 in 3Q23 2023 NIE up 4.8% vs. 2022, below asset growth of 6.1% YoY 58.8% 56.1% 52.3% 45.9% 43.8% $15,740 $15,203 $15,237 $14,06
Slide 9: Continued Deposit Growth Momentum
Continued Deposit Growth Momentum Deposit Growth to Support Loan Growth Outlook $3,676 $3,710 • Total deposit balances up 3.7% annualized $3,578 $3,417 $3,411 • Core deposit1 balances down 5.8% annualized • Noninterest-bearing deposits increased for the 3rd consecutive quarter 27% 28% 27% 23% 25% •
Slide 10: Moderated Loan Growth Continued, But Loan Demand Improved
Moderated Loan Growth Continued, But Loan Demand Improved Loan Growth Moderated in 2023 $3,736 • 4Q23 loan balances up $2.0M, or 0.2% annualized $3,722 $3,724 $3,684 • FY23 loan balances up $154.8M, or 4.3% $3,569 • Reduced loan demand due to the higher interest rate environment • Payoffs and paydow
Slide 11: Loan Portfolio to Reprice Higher Even If Interest Rates Decline
Loan Portfolio to Reprice Higher Even If Interest Rates Decline Fixed-Rate Portfolio Variable-Rate Portfolio Adjustable-Rate Portfolio ($2.6B) ($541M) ($572M) Adjustable-Rate Years to Maturity Variable-Rate Loan Floors Repricing/Maturity Schedule Loan Portfolio Mix $452 $700 $502 $147 $391 $387 $136
Slide 12: Well-Diversified Loan Portfolio with a Multifamily Focus
Well-Diversified Loan Portfolio with a Multifamily Focus Consumer & Other 4Q23 Loan Growth by Type (vs. 3Q23) 0.2% CRE Nonowner Occupied $36 CRE OO C&I 4.7% CRE Owner Occupied $16 13.0% CRE NOO Multifamily $10 27.0% 1-4 Family C&I $4 Loan Mix Mortgage $3.7 Consumer & Other by Type 10.8% $(1) Billion
Slide 13: CRE Concentration Driven by a Proven, Lower Risk Multifamily Portfolio
CRE Concentration Driven by a Proven, Lower Risk Multifamily Portfolio Multifamily Makes Up Over Multifamily: A Consistently Lower Risk Profile Than Traditional CRE Half of CRE Concentration Differentiated Lending Approach Favorable Twin Cities Multifamily Market 482% $2,674 of Bank RBC • Bank of ch
Slide 14: Managing CRE and Office-Related Risk
Managing CRE and Office-Related Risk Addressing CRE NOO Repricing Risk Well-Managed CRE NOO Office Exposure1 Lower Fixed-Rate Small CRE NOO Low Average Loan LTVs In-Line with the Low LTVs Repricing Risk Maturity Schedule Office Portfolio Size Total Loan Portfolio 82% $189M 59% 5.2% $2.3M 62% are Fix
Slide 15: Superb Asset Quality Continues
Superb Asset Quality Continues Allowance for Credit Losses Nonperforming Assets1 Net Charge-Offs Modest CECL Day 1 impact of $650K Consistently low NPA levels Cumulative NCOs of $537K since 2019 on January 1, 2023 $50,701 $50,585 $50,494 $50,148 $47,996 $919 $809 $778 $749 $639 1.34% 1.36% 1.36% 1.3
Slide 16: Watch and Substandard Loans Remain Stable
Watch and Substandard Loans Remain Stable Watch List Loans Substandard Loans $36,258 $33,821 $35,621 $35,858 $32,252 $27,574 $27,215 $26,877 $26,485 $28,049 4Q22 1Q23 2Q23 3Q23 4Q23 4Q22 1Q23 2Q23 3Q23 4Q23 Watch List Loans Substandard Loans CRE OO C&D 1-4 4.3% 0.9% Family 1.9% CRE Other 9.1% C&I 15
Slide 17: Building Capital Ratios
Building Capital Ratios Building Capital in the Current Environment Capital Priorities 13.50% 13.88% 13.97% 1 Organic Growth 13.15% 13.25% Drive profitability by supporting a proven organic loan growth engine 9.62% 9.55% 9.41% 9.47% 9.57% 2 Share Repurchases 9.07% 9.16% Opportunistically return capi
Slide 18: 2024 Expectations
2024 Expectations • Low-to-mid-single digit loan growth, likely weighted more toward 2H24 Balance Sheet • Focus on aligning loan growth with core deposit growth Growth • Target loan-to-deposit ratio between 95% and 105% • Continued near-term stabilization in the current interest rate environment Net
Slide 19: 2024 Strategic Priorities
2024 Strategic Priorities Generate Incremental Optimize Balance Sheet for Continue to Gain Loan and Scale ERM Function and Operational Efficiencies While Longer Term Profitable Growth Deposit Market Share Monitor Asset Quality Risks Investing in the Business • Opportunistically gather core • Expand
Slide 20: Appendix
——™ BRIDGEWATER BANCSHARES, INC. APPENDIX 20
Slide 21: 2023 Strategic Priorities
2023 Strategic Priorities 2023 Outcome • Slower pace of balance sheet growth in the current environment Moderated 2023 loan growth of 4.3% Manage High Quality • Manage the balance sheet to optimize net interest income 1 Balance Sheet Growth • Increase emphasis on generating core deposit growth to su
Slide 22: Payoffs and Paydowns Impacting Loan Growth
Payoffs and Paydowns Impacting Loan Growth 4Q23 Loan Growth Waterfall New Loan Originations and Advances $313 $127 $220 $158 $158 $131 $145 $87 $87 $186 $84 $75 $47 $71 $71 4Q22 1Q23 2Q23 3Q23 4Q23 New Originations Advances Loan Payoffs and Amortization/Paydowns $166 $141 $147 $111 $60 $42 $99 $45 $
Slide 23: Interest Rate Sensitivity
Interest Rate Sensitivity Estimated Change in NII From Loan Portfolio Considerations Immediate Interest Rate Shocks Liability-sensitive balance sheet well positioned for rate cuts and a • Loan portfolio most sensitive to changes in the 3- to 5-year portion of the normalizing yield curve yield curve
Slide 24: High Quality Securities Portfolio
High Quality Securities Portfolio Securities Available for Sale Portfolio Derivatives Portfolio Offsetting AOCI Impact $28,581 $27,227 $604 $549 $559 $538 $553 18% 13% 15% 14% 18% 20% 21% 22% 21% 22% 24% 23% 22% $(17,942) 24% 22% $(18,246) 43% 41% 41% 38% 38% $(44,512) $(47,884) 4Q22 1Q23 2Q23 3Q23
Slide 25: Ample Liquidity and Borrowing Capacity
Ample Liquidity and Borrowing Capacity Liquidity Position with 2.5x Coverage of Uninsured Deposits Diverse Liquidity Mix Available Balance $2,234 $2,181 Funding Source 12/31/2023 12/31/2022 Change Cash $ 97 $ 48 $ 49 $1,924 $1,962 Unpledged Securities1 433 549 (116) FHLB Capacity 499 391 108 FRB Dis
Slide 26: Reconciliation of Non-GAAP Financial Measures – Profitability and TCE
Reconciliation of Non-GAAP Financial Measures – Profitability and TCE As of and for the quarter ended, As of and for the quarter ended, December 31, March 31, June 30, September 30, December 31, December 31, Efficiency Ratio 2022 2023 2023 2023 2023 ROATCE 2023 Noninterest Expense $ 15,203 $ 14,069
Slide 27: Reconciliation of Non-GAAP Financial Measures – PPNR
Reconciliation of Non-GAAP Financial Measures – PPNR As of and for the quarter ended, December 31, March 31, June 30, September 30, December 31, Pre-Provision Net Revenue 2022 2023 2023 2023 2023 Noninterest Income $ 1,738 $ 1,943 $ 1,415 $ 1,726 $ 1,409 Less: (Gain) Loss on Sales on Securities (30)
Slide 28: Reconciliation of Non-GAAP Financial Measures – Core NIM
Reconciliation of Non-GAAP Financial Measures – Core NIM As of and for the quarter ended, December 31, March 31, June 30, September 30, December 31, Core Net Interest Margin 2022 2023 2023 2023 2023 Net Interest Income (Tax-Equivalent Basis) $ 33,260 $ 28,947 $ 26,280 $ 25,822 $ 25,683 Less: Loan Fe
Slide 29: Reconciliation of Non-GAAP Financial Measures – Tangible Book Value
Reconciliation of Non-GAAP Financial Measures – Tangible Book Value As of and for the quarter ended, December 31, March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31, March 31, Tangible Book Value Per Share 2016 2017 2017 2017 2017 2018 2018 2018 2018 2019 Book
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