Bridgewater Bancshares Inc 8-K, filed Feb 24, 2022
Bridgewater Bancshares Inc (BWB)
About this 8-K
Bridgewater Bancshares Inc filed this 8-K on February 24, 2022.
Items reported
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Item 7.01 Regulation FD Disclosure.
Bridgewater Bancshares, Inc. (the “Company”) is furnishing an Investor Presentation, which will be used, in whole or in part, from time to time by executives of the Company in meetings with investors and analysts. A copy of the Investor Presentation is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
The information furnished in this item of this Form 8-K, and the related exhibits, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as may be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit 99.1 |
Exhibit 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Bridgewater Bancshares, Inc. |
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Date: February 24, 2022 | |
| By: /s/ Jerry Baack |
| Name: Jerry Baack |
| Title: Chairman, Chief Executive Officer and President |
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Exhibit 99.2
| Investor Presentation Fourth Quarter 2021 |
| Disclaimer Forward - Looking Statements This presentation contains “forward - looking statements” within the meaning of the safe harbor provisions of the U.S. Private Sec urities Litigation Reform Act of 1995. Forward - looking statements include, without limitation, statements concerning plans, estimates, calculations, forecasts and projections with respect to the anticipated future performance of the Company. The se statements are often, but not always, identified by words such as “may”, “might”, “should”, “could”, “predict”, “potential”, “believe”, “expect”, “continue”, “will”, “anticipate”, “seek”, “estimate”, “intend”, “plan”, “projection”, “woul d”, “annualized”, “target” and “outlook”, or the negative version of those words or other comparable words of a future or forward - looking nature. Forward - looking statements are neither historical facts nor assurances of future performance. Instead, t hey are based only on our current beliefs, expectations and assumptions regarding our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward - looking stateme nts relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult t o predict and many of which are outside of our control. Our actual results and financial condition may differ materially from t hos e indicated in the forward - looking statements. Therefore, you should not rely on any of these forward - looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in th e f orward - looking statements include, among others, the following: the negative effects of the ongoing COVID - 19 pandemic, including its effects on the economic environment, our clients and our operations, including due to supply chain disruptions, as well as any changes to federal, state or local government laws, regulations or orders in connection with the pandemic; loan concentrations in our portfolio; the overall health of the local and national real estate market; our ability to successfully ma nage credit risk; business and economic conditions generally and in the financial services industry, nationally and within ou r market area, including rising rates of inflation; our ability to maintain an adequate level of allowance for loan losses; new or revised accounting standards, including as a result of the future implementation of the Current Expected Credit Loss standard ; the concentration of large loans to certain borrowers; the concentration of large deposits from certain clients; our ability to successfully manage liquidity risk, especially in light of recent excess liquidity at Bridgewater Bank; our dependence on non - core funding sources and our cost of funds; our ability to raise additional capital to implement our business plan; our abili ty to implement our growth strategy and manage costs effectively; developments and uncertainty related to the future use and availability of some reference rates, such as the London Interbank Offered Rate, as well as other alternative reference rates ; t he composition of our senior leadership team and our ability to attract and retain key personnel; talent and labor shortages and high rates of employee turnover; the occurrence of fraudulent activity, breaches or failures of our information security con trols or cybersecurity - related incidents; interruptions involving our information technology and telecommunications systems or third - party servicers; competition in the financial services industry, including from nonbank competitors such as cre dit unions and “fintech” companies; the effectiveness of our risk management framework; the commencement and outcome of litigation and other legal proceedings and regulatory actions against us; the impact of recent and future legislat ive and regulatory changes, including changes to federal and state corporate tax rates; interest rate risk, including the effects o f anticipated rate increases by the Federal Reserve; fluctuations in the values of the securities held in our securities portfo lio ; the imposition of tariffs or other governmental policies impacting the value of products produced by our commercial borrowers; severe weather, natural disasters, wide spread disease or pandemics (including the COVID - 19 pandemic), acts of war or terrorism or other adverse external events; potential impairment to the goodwill we recorded in connection with our past acquisition; changes to U.S. or state tax laws, regulations and guidance, including recent proposals to increase the fed era l corporate tax rate; and any other risks described in the “Risk Factors” sections of reports filed by the Company with the Securities and Exchange Commission. Any forward - looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward - looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or o the rwise. Certain of the information contained in this presentation is derived from information provided by industry sources. Although we believe that such information is accurate and that the sources from which it has been obtained are relia ble , we cannot guarantee the accuracy of, and have not independently verified, such information. Use of Non - GAAP financial measures In addition to the results presented in accordance with U.S. General Accepted Accounting Principles (“GAAP”), the Company rou tin ely supplements its evaluation with an analysis of certain non - GAAP financial measures. The Company believes these non - GAAP financial measures, in addition to the related GAAP measures, provide meaningful information to investors to help them understand the Company’s operating performance and trends, and to facilitate comparisons with the performance of peers. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non - GAAP performance measures that may be presented by other companies. Reconciliations of non - GAAP disclosures to the comparable GAAP measures are provided in this presentation. 2 |
| The Finest Entrepreneurial Bank in the Twin Cities Company Overview Branch - Light Model in Attractive Twin Cities Market Twin Cities MSA Name: Bridgewater Bancshares, Inc. Headquarters: St. Louis Park, MN Ticker: NASDAQ: BWB; BWBBP Assets: $3.5 Billion Loans: $2.8 Billion Deposits: $2.9 Billion Equity: $379.3 Million Serving a Commercial - Focused Client Base Track Record of Profitability, Growth and Efficiency • CRE lending • Acquisition financing • Construction lending • Affordable housing financing • Long - term multifamily financing • Commercial & business lending • Business / cash management • SBA lending • 1 - 4 family rentals • Personal banking CRE , 33% Multifamily , 32% C&D , 10% PPP , 1% C&I , 13% 1 - 4 Family , 11% Consumer , 0% $2.8B Business and Personal Banking Commercial Banking Loan Balances • Founded in 2005 by a group of banking industry veterans and local business leaders • Continuous profitability since the third month of operations • Proven stability, growth and profitability through both the Great Recession and the COVID - 19 pandemic • Expertise in commercial real estate with a focus in multifamily lending • Organizational focus on risk management • Effective operating model, with one of the lowest efficiency ratios in the industry Data as of December 31, 2021 3 |
| Strategic Leadership Team with Broad Skill Sets and Industry Expertise 4 Jerry Baack Chairman, CEO and President • Past regulator and responsible for all aspects of BWB formation • Lead founder of BWB in 2005 • 30+ years of banking experience Jeff Shellberg EVP and Chief Credit Officer • Holding company board member and oversees strong credit and underwriting culture • BWB founding member in 2005 • 35+ years of regulatory and banking experience Nick Place Chief Lending Officer • Client - focused while meeting and responding to market demands • Joined BWB in 2007 • 15 years of banking experience Mark Hokanson Chief Technology Officer • Proactively drives technology and innovative solutions to support future growth • Joined BWB in 2019 • 14 years of financial services technology experience Mary Jayne Crocker EVP and Chief Operating Officer • Implementation of unique corporate culture and strategic execution • Joined BWB in 2005 • 20+ years of financial services experience Joe Chybowski Chief Financial Officer • Strategic insights across the organization including capital and liquidity management • Joined BWB in 2013 • 12 years of banking and capital markets experience Lisa Salazar Chief Deposit Officer • Drives accountability and results through initiatives that deliver revenue growth, market share, new business opportunities and market penetration • Joined BWB in 2018 • Nearly 30 years of banking experience |
| A Culture - Driven Organic Growth Story 5 Consistent Profitability and Shareholder Return Truly Unconventional Culture Highly Efficient Business Model Robust Balance Sheet Growth Proactive Risk Management • Entrepreneurial spirit unlike the culture at a typical bank • New HQ with modern, open layout promoting team member and client collaboration • Commitment to provide clients with quick answers, responsive support and simple solutions • Commitment to positively impacting the communities we serve • Generating robust organic loan growth is simply who we are (25% CAGR 1 since 2015) • Commercial business expertise with a multifamily focus • Deposit growth keeping pace with loan growth • M&A - related market disruption resulting in client and banker acquisition opportunities to support loan and deposit growth • Branch - light model • Efficient operating philosophy, including networking, banking tools and in - house expertise • Low levels of expenses as a percent of total assets compared to peers • Efficiency ratio consistently in the low 40% range, among the lowest in the industry • Scaling of risk management function to address emerging risks and support growth plans • Decisive credit culture including consistent underwriting, active loan monitoring and deep industry experience • Well diversified loan portfolio across asset classes • Superb asset quality despite the COVID - 19 impact >2% Consistent Pre - Provision Net Revenue (PPNR) ROA 2 22% Diluted EPS CAGR since 2017 19% Tangible book value per share 2 CAGR since 2017 1 Excludes PPP loans 2 Represents a Non - GAAP financial measure. See Appendix for Non - GAAP reconciliation. |
| Our Core Values Unconventional. Our clients notice a difference. Responsive. Under promise, over deliver. Dedicated. Don’t stop until you get it done. Growth. If you aren’t moving forward, where are you going? Accurate. It’s more than just an expectation. 6 |
| An Award - Winning Workplace Culture “I envisioned a bank where clients would notice a difference, where people would be challenged to grow both professionally and personally and where team members would be appreciated for sharing their skills and rewarded for a job well done.” Jerry Baack Chairman, CEO and President Top Workplaces Star Tribune 2016. 2017. 2018. 2020. 2021. Best Banks to Work For American Banker 2017. 2018. 2020. 7 New Corporate Headquarters Progressive Pay and Benefits Health and Wellness Committee Diversity, Equity and Inclusion Committee Volunteer Paid Time Off Modern, open design with an entrepreneurial spirit tailor - made for team building and collaboration Increased minimum wage to $20 per hour in August 2021, as well as discretionary bonuses for all team members regardless of level Providing team member opportunities to support physical and mental health , including fitness events and free access to a mindfulness app Inclusive culture that encourages, supports and celebrates diversity of team members and communities in which we serve Team members receive up to 16 hours of PTO per year for volunteer activities supporting the Community Reinvestment Act (CRA) |
| A Responsive Service Model Our clients can expect… • Responsive support and simple solutions • A local bank of choice in a market where many local banks have left • Flexibility, market expertise and strong network connections 8 “Bridgewater’s ability to adapt, keep pace and deliver unconventional results is invaluable. They are a complete joy to work with.” Josh Brandsted Greco The “Proven Process” for Our Clients |
| A Commitment to Our Communities Our communities can expect… Bridgewater’s commitment to investing, lending and volunteering in ways that serve low - to - moderate income segments in the Twin Cities ‘Outstanding’ Rating for Community Reinvestment Act Performance FDIC, 2020 Impacting the greater good .. 9 |
| Attractive Twin Cities Market Built for Business 10 #1 Fortune 500 companies per capita (16) 1 Large Corporate Presence #1 State with highest average credit score (726) 2 Credit Worthy Population #1 Best place for women entrepreneurs 3 Women Entrepreneurs #5 State with educational achievement beyond high school (59% of age 25 - 64 population) 4 Educated Workforce #7 America’s top states for business 5 Business Focus Top 20 Most populated area in the U.S. with 4.5% projected population growth by 2027 6 High Growth MSA 4.53% 1.97% 3.21% Twin Cities Midwest US $92,084 $68,394 $72,465 Twin Cities Midwest US Banking industry disruption caused by M&A activity leading to opportunities for client and talent acquisition in the Twin Cities Banking Industry Disruption 2022 Median Household Income ($) 7 2022 – 2027 Proj. Population Growth (%) ⁶ 1 Source: Minnesota Department of Employment and Economic Development 2 Source: Experian – State of Credit, 2021 3 Source: Minneapolis - St. Paul Smart Asset TM , 2020 4 Source: Lumina Foundation, A Stronger Nation – National Report, 2021 5 Source: CNBC, 2019 6 Source: S&P Capital IQ 7 Source: S&P Capital IQ, Midwest includes ND, SD, NE, KS, MN, IA, MO, WI, IL, IN and OH |
| History of Organic Asset Growth Generation 11 $1,184 $76 $929 $1,260 $1,617 $1,974 $2,269 $2,927 $3,478 2015 2016 2017 2018 2019 2020 2021 Acquired Assets Organic Proven ability to consistently generate 20%+ annual asset growth primarily in the Twin Cities market Asset growth has almost exclusively been organic, with the exception of a small bank acquisition in 2016 Dollars in millions Anticipate the Twin Cities market can support BWB growth to at least $5B in assets over the next few years |
| Robust Loan Growth Isn’t Unusual at BWB, It’s Who We Are 12 $2,188 $2,793 $138 $26 $799 $1,001 $1,347 $1,665 $1,912 $2,326 $2,819 2015 2016 2017 2018 2019 2020 2021 PPP Loans (ex. PPP) Current BWB Loan Growth Catalysts Strong brand and service model in the Twin Cities market Expanding referral base means getting a look at the CRE deals we want M&A - related market disruption resulting in client and banker acquisition opportunities PPP - related client acquisition opportunities Over 40% of PPP loan originations were to new clients Expansion of talented lending and business services teams Supporting loan and deposit growth and enhancing client experience Expect near - term annualized loan growth (ex. PPP) in the mid - to high - teens range Dollars in millions Operating in a competitive “sweet spot” in the Twin Cities Financing larger deals than community banks but under the radar of the larger banks |
| Well - Diversified Loan Portfolio With a Commercial Focus 13 CRE NOO 29% Multifamily 32% C&D 10% 1 - 4 Family 11% CRE OO 4% C&I 13% PPP 1% Consumer & Other 0% $2.8B CRE NOO 27% Multifamily 21% C&D 15% 1 - 4 Family 18% CRE OO 6% C&I 13% Consumer & Other 0% $0.8B Evolution of Loan Mix by Type 2015 2021 Intentional mix shift toward Multifamily has aligned with the build - out of talent and expertise in the segment, and continued strong performance 354% 333% 318% 304% 313% 266% 264% 180% 164% 185% 177% 204% 190% 219% 534% 497% 503% 480% 517% 456% 483% 2015 2016 2017 2018 2019 2020 2021 Track Record of Successfully Managing CRE Portfolio Above 300% of Bank Capital Multifamily / Bank Risk - Based Capital CRE (ex. Multifamily) / Bank Risk - Based Capital • Remain comfortable with current CRE concentration levels • Declining CRE concentration (ex. Multifamily) below 300% of bank capital • View Multifamily separate from traditional CRE given its lower risk profile • No net charge - offs over the past five years • Only $62K of net charge - offs since inception Ability to consistently supplement the capital stack with capital raises to support continued CRE growth |
| Well - Positioned for Continued Growth Opportunities Across Key Portfolios 14 5 - 19 Units 15% 20 - 49 Units 27% 50 - 99 Units 32% 100+ Units 26% Size YoY Growth Go - to - Market Strategy Competitors Growth Outlook Key Stats Portfolio Diversification Multifamily CRE Nonowner Occupied C&I Construction & Development $910M 32% of portfolio $819M 29% of portfolio $360M 13% of portfolio $281M 10% of portfolio 45% 15% 18% 65% Bank of choice in the Twin Cities market due to proven expertise and service model Knowledgeable lenders with efficient closing processes and ample capacity Responsive support, simple solutions and the local touch entrepreneurs are looking for Continued build - out of team creating additional client opportunities JPMorgan Chase, agency lenders, local banks and credit unions Local banks, life insurance companies Local banks, regional banks Local banks Continued appetite given expertise and market opportunities Strong market fundamentals and recent hires drive market share gains Growth due to recent hires with goal to add loan diversification over time Growth to continue as recent projects fund over 12 - 24 months $2.5M Avg. Loan Size 63% Weighted Avg. LTV 100% Loans with Pass Rating $2.2M Avg. Loan Size 61% Weighted Avg. LTV 96% Loans with Pass Rating $449K Avg. Loan Size 0.03% 5 - Year NCOs 98% Loans with Pass Rating $821K Avg. Loan Size 64% Weighted Avg. LTV 0.00% 5 - Year NCOs Unit Type Office 29% Retail 19% Industrial 27% Senior Housing 9% Hotel 2% Restaurant 3% Other 11% Property Type RE, Rental and Leasing 41% Constr. 13% Manufact. 12% Finance & Ins. 11% Prof. Services 7% Accom. & Food Service 4% Trade 5% Other 7% Industry Residential 16% Multifamily 47% CRE Other 13% Land 24% Property Type Data as of December 31, 2021 |
| Deposit Market Share Momentum in the Twin Cities Continues 15 Total Deposits – Minneapolis/St. Paul MSA 2012 2021 Rank Bank HQ Branches Deposits ($M) Market Share 1 Wells Fargo & Co. CA 100 79,407 $ 49.80% 2 U.S. Bancorp MN 100 43,088 $ 27.02% 3 Ameriprise Financial Inc. MN 1 5,107 $ 3.20% 4 TCF Financial Corp. MN 102 4,992 $ 3.13% 5 Bank of Montreal CAN 34 2,760 $ 1.73% 6 Bremer Financial Corp. MN 30 2,205 $ 1.38% 7 Associated Banc-Corp WI 28 1,395 $ 0.87% 8 Klein Financial Inc. MN 18 1,129 $ 0.71% 9 Anchor Bancorp Inc. MN 15 1,126 $ 0.71% 10 Central Bancshares Inc. MN 16 732 $ 0.46% 17 Bridgewater Bancshares, Inc. MN 2 398 $ 0.25% Top 10 141,941 $ 89.01% MSA Total 159,467 $ Market Ripe for Continued Market Share Gains • Top - heavy deposit market (top 2 market share = 65%) • Top 2 have lost market share each of the last seven years (2014: 84% / 2021: 65%) • Very fragmented market after the top 2 with no other bank having market share over 5% • Significant M&A activity in the market creating opportunities for talent and client acquisition • BWB has a local banking advantage with only 4 of the top 10 banks headquartered in MN Source: S&P Capital IQ Rank Bank HQ Branches Deposits ($M) Market Share 1 U.S. Bancorp MN 84 75,920 $ 34.25% 2 Wells Fargo & Co. CA 91 68,134 $ 30.74% 3 Ameriprise Financial Inc. MN 2 8,673 $ 3.91% 4 Bank of Montreal CAN 26 7,849 $ 3.54% 5 Huntington Bancshares, Inc. OH 77 6,545 $ 2.95% 6 Bremer Financial Corp. MN 21 5,705 $ 2.57% 7 Bank of America Corp. NC 13 5,134 $ 2.32% 8 Old National Bancorp IN 29 3,886 $ 1.75% 9 Bridgewater Bancshares Inc. MN 7 2,748 $ 1.24% 10 State Bankshares, Inc. ND 6 2,558 $ 1.15% Top 10 187,153 $ 84.44% MSA Total 221,640 $ |
| Deposit Growth With Improving Mix Provides Funding for Loan Growth 16 22% 23% 22% 24% 25% 27% 30% 17% 13% 13% 11% 14% 15% 18% 20% 23% 28% 26% 28% 26% 29% 25% 27% 22% 20% 20% 14% 10% 16% 14% 15% 19% 13% 18% 13% $762 $1,024 $1,339 $1,561 $1,823 $2,502 $2,946 2015 2016 2017 2018 2019 2020 2021 Interest - Bearing Transaction Noninterest - Bearing Transaction Time Savings and Money Market Brokered Improving Deposit Mix 1 20% 29% 39% 48% 25% 10% Transaction Deposits Savings & MM Time Deposits Executing on Deposit Strategies to Continue to Fund Loan Growth • Capitalizing on market opportunities through client and banker acquisitions, including expanding commercial client relationships 1 Mix changes from 2015 to 2021 Dollars in millions Transaction • Capitalizing on market opportunities as well, while also focusing on retaining maturing CD balances through money market accounts Savings and Money Market • Running off time deposit balances to help manage overall cost of funds ($123M maturing over the next five quarters) Time • Looking to efficiently supplement core deposit growth with occasional low - cost brokered deposits Brokered Robust Deposit Growth • Recent deposit growth drivers include: • New client and banker acquisition opportunities due to M&A disruption • Expansion of treasury management team • Deposits from PPP relationships • Deposit Growth Plan – incentive program for team members to refer new business (~$483M of balances) • Expect deposit growth to continue to fund loan growth going forward |
| Scaling Enterprise Risk Management Across a Growing Organization 17 Manage and mitigate dynamic risks while enhancing shareholder value, being responsive to clients, and delivering simple solutions in unconventional ways BWB Risk Management Philosophy Enterprise Risk Management Attributes in Place Today at BWB • Proactively addressing emerging risks across all risk categories • Continuing to scale a risk framework aligned with superior asset growth • Enhancing our comprehensive Risk Appetite Statement to bring efficiencies to governance and oversight structures • Leveraging technology to enhance processes and controls • Reinforcing operational and financial resilience through all three lines of defense • Continuing to make investments to bolster vendor/third - party risk management program Making Investments to Proactively Identify and Mitigate Emerging Risks Credit Concentration Risk Information and Cybersecurity Risk Enterprise Risk and Compliance Financial Risk • Strong credit underwriting and administration program • Active credit oversight and monitoring • Expertise and specialization in key portfolios, including multifamily • Investment in enhanced infrastructure and security protocols • Proactively leverage technology to meet the evolving digital needs of clients while maintaining safety and security • Effective risk culture and awareness model with ongoing training initiatives • Focus on recruitment and retention of highly skilled risk professionals • Investments in technology to enable scalable and effective governance and oversight • Formal Risk Appetite Statement aligned with strategic objectives and growth • Monitoring and managing the balance sheet with an eye toward potential interest rate volatility • Actively monitoring and deploying excess liquidity • Continued investments in CECL prep, LIBOR transition and SOX implementation |
| Credit Risk Management Supports Strong Loan Growth Momentum 18 5 - Year Peak Net Charge - off Ratio vs. Peers 5 - Year Peak Nonperforming Assets 2 / Assets vs. Peers 0.02% BWB Peer Bank Median 1 0.15% 0.11% BWB Peer Bank Median 1 0.60% 1 Includes publicly - traded banks with total assets between $2 billion and $10 billion as of December 31, 2021 (Source: S&P Capital IQ) 2 Nonaccrual loans, loans 90 days past due and foreclosed assets Consistent Asset Quality Outperformance vs. Peers Why is BWB comfortable with its consistent pace of loan growth? Consistent Underwriting Standards Active Credit Oversight and Monitoring Experienced Lending and Credit Teams • Growth continues to primarily be in - market with approximately 85% of loans in the Twin Cities market • No new lending areas or significant changes in portfolio composition – continued focus on multifamily expertise • Growth is a function of enhanced brand, market disruption (M&A), favorable economics and expanding lending staff • No individual lending authorities • Full loan committee approval required for nearly 80% of loan origination volume in 2021 (ex. PPP) • Enhanced credit concentration monitoring • Added 5 SVP lenders since early 2020 averaging 15+ years of experience • Continued build - out of the credit team, including real estate due diligence and internal credit risk review positions • Solid lender and credit analyst expertise across segments, geographies and relationships |
| Credit Management Driving Superb Asset Quality Despite COVID Impact 19 $5,888 $4,184 $2,695 $15,164 $22,641 3.43% 1.82% 1.01% 4.54% 5.45% 2017 2018 2019 2020 2021 Classified Assets 2021 increase primarily due to pandemic - related migration of two relationships from Watch to Classified in 4Q21 Classified Assets % of Bank Tier 1 Capital + ALLL $1,720 $581 $461 $775 $722 0.11% 0.03% 0.02% 0.03% 0.02% 2017 2018 2019 2020 2021 Nonperforming Assets 1 Consistently low NPA levels NPAs % of Assets 1 Nonaccrual loans, loans 90 days past due and foreclosed assets Dollars in thousands $16,502 $20,031 $22,526 $34,841 $40,020 1.59% 1.43% 1.22% 1.20% 1.18% 1.50% 1.42% 2017 2018 2019 2020 2021 Allowance for Loan Losses Current reserves at appropriate levels; CECL adoption coming in 2023 ALLL % of Gross Loans $6 $46 $205 $435 $(29) 0.00% 0.00% 0.01% 0.02% 0.00% 2017 2018 2019 2020 2021 Net Charge - Offs Cumulative NCOs of $663K since 2017 Net Charge - Offs % of Average Loans % of Gross Loans (ex. PPP) Limited Exposure to COVID Impacted Sectors (as of Dec. 31, 2021) Hotels Restaurants (CRE) Office • Only four hotel relationships ($20M, or 0.7% of loans) • Two relationships on the Watch list • Only 19 restaurant loans ($26M, or 0.9% of loans) • All 19 loans are Pass rated • 100 CRE office loans ($237M, or 8.4% of loans) • 98 loans are Pass rated • Most are small office buildings less than 125K square feet |
| Consistent Spread - Based Revenue Growth Model 20 $32,695 $42,118 $54,173 $64,738 $74,132 $87,964 $109,509 $1,872 $2,567 $2,536 $2,543 $3,826 $5,839 $5,309 $34,567 $44,685 $56,709 $67,281 $77,958 $93,803 $114,818 2015 2016 2017 2018 2019 2020 2021 Noninterest Income Net Interest Income 1 Amounts calculated on a tax - equivalent basis using statutory federal tax rate of 21% 2 Excludes loan fees and PPP loan balances, interest and fees; represents a Non - GAAP financial measure, see Appendix for Non - GAAP reconciliation Dollars in thousands Net Interest Income Noninterest Income 21% YoY Loan Growth 28% YoY Loan Growth (ex. PPP) 3.51% 3.25% 4Q21 Core Net Interest Margin 2 4Q21 Net Interest Margin 1 • Primary revenue source • Net interest income growth to be driven by robust loan growth and strong net interest margin • Estimated $0.9M of PPP fees yet to be recognized • Comfortable with spread - based revenue stream given commercial - focused business model • Less exposure to volatile revenue streams such as mortgage and credit cards • No material exposure to overdraft revenue • Noninterest income growth to be tied to client account growth • Ongoing review and evaluation of new potential streams of noninterest income |
| 44.4% 46.5% 47.4% 49.0% 42.0% 41.1% 41.7% 43.3% 40.5% 41.0% 60.5% 60.1% 59.8% 57.8% 57.4% 2017 2018 2019 2020 2021 Among the Most Efficient Banks in the Industry 21 BWB Adjusted 1 BWB Reported 1 An Efficiency Ratio Consistently Well Below Peers Peer Bank Median 2 1 Represents a Non - GAAP financial measure. See Appendix for Non - GAAP reconciliation. 2 Includes publicly - traded banks with total assets between $2 billion and $10 billion as of December 31, 2021 (Source: S&P Capita l IQ) 3 FY 2021 What Makes BWB So Efficient? Efficient Operating Culture ~2x as many assets per FTE employee compared to the peer bank median 2 1.51% NIE/average assets 3 (peer bank median: 2.20%) 7 Branches ~4x as many assets per branch compared to the peer bank median 2 Lower compensation and occupancy expenses as a percent of average assets compared to peers Branch - Light Service Model Branch - light model allows key investments in technology while maintaining a low efficiency ratio To maintain a low efficiency ratio while continuing to invest in the business… BWB CAGR Since 2017 Asset Growth 3 Revenue Growth 3 NIE Growth 3 23% 21% 19% …we expect revenue and expenses to continue to grow as the balance sheet grows |
| Leveraging Technology to Support Growth 22 Client - Facing Enhancements • Modern platforms and payment options for business and personal clients: • Commercial Center • P2P • A2A • E signature • Real - time alerts 10% YoY increase in digital users Infrastructure Improvements • Collaborative technology tools integrated into new BWB Corporate Center • Remote capabilities to support pandemic resiliency • Data center upgrades for maintaining core infrastructure • IT service management and delivery enhancements • Cyber threat detection and response Workforce and Collaboration • Leveraging visualization and analytics to support decision - making processes • Implementation of scalable workflow automation to improve efficiencies • PPP technology integration – highlighting the need for automation 25 % YoY increase in number of mobile deposits Scalable core to support near - term growth outlook Core Banking Platform IT Strategy: improve client interactions, streamline processes, automate activities, and embrace digital transformation IT Decision - Making: driven by unconventional culture, enhancing the client experience and improving organizational efficiencies IT Current State NEED: PPP Case Study An automated process to manage workflows and track loan status SOLUTION: Partnership with ServiceNow to develop a loan management platform • Integrated into existing workflows • Real - time status updates • Central tracking of customer data • Less than one week from concept to launch - ready IMPACT: • Ongoing benefits include deposit product integration and client follow - up efficiencies • Changing how BWB is evaluating future technology solutions 48% Reduction in workload per case file 3 Hours saved per day due to automation |
| Investments in Technology Continue 23 What’s Next? Enhanced Commercial Loan Origination Platform • Launching an industry - leading Commercial loan origination system in early 2022 • Focusing on the core strength in Commercial lending and customer responsiveness • Digitizing the end - to - end lending process • Creating broad organizational efficiencies to support overall growth Core Banking Enhancements • Expand cloud technology adoption to accelerate time to value for the business • Leverage partnerships to monitor emerging technology trends Cloud Adoption and Fintech Technology Spend Becoming a Larger Portion of Total Expenses 57% 48% 29% 21% 13% 11% 1% 20% $480 $495 $564 $652 $690 $753 $849 $923 $860 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1 Includes data processing and information technology and telecommunications expense 2 Excludes and FHLB advance prepayment fees and debt prepayment fees Dollars in thousands Technology expense mix shift toward increased efficiencies through investments in workflow automation Infrastructure Core Banking Workflow Automation Security 4.6% 5.1 % 6 ..1% 6.7% 7.2 % 6.9 % 7.4 % 7.3% 6.9% • Accelerate digital adoption and enrich the client experience • Enhance end - user functionality • Modernize fraud and anomaly detection Technology expense 1 as a % of total NIE 2 |
| Proactive Capital Management 24 12.46% 14.55% 12.98% 14.58% 15.55% 9.49% 12.07% 11.39% 10.35% 9.36% 8.38% 11.23% 10.69% 9.28% 10.82% 8.26% 11.03% 10.65% 8.96% 8.91% 2017 2018 2019 2020 2021 Total Risk - Based Capital Common Equity Tier 1 Capital Capital Ratios Supported by Profitability and Capital Markets Activity Tangible Common Equity to Tangible Assets 1 1 Represents a Non - GAAP financial measure. See Appendix for Non - GAAP reconciliation. BWB Capital Priorities 1 2 3 Organic Growth Share Repurchases M&A 4 Dividends Ample room for growth and profitability via strong organic loan growth pipelines Proactively return capital to shareholders by buying back stock at appropriate valuations Review and evaluate corporate development opportunities that complement BWB’s business model Have not historically paid a common stock dividend given robust loan growth opportunities Tier 1 Leverage Ratio |
| Funding Source Available Balance Cash 131 $ Unpledged Securities 439 FHLB Advances 551 FRB Discount Window 126 Unsecured Lines of Credit 208 Secured Line of Credit 25 Total 1,480 $ Putting Excess Liquidity to Work 25 14.3% 14.2% 18.4% 16.4% 16.5% 18.9% 19.8% 26.2% $608 $750 $1,121 $1,480 2018 2019 2020 2021 Strong Liquidity Position Off - Balance Sheet Liquidity as a % of Assets On - Balance Sheet Liquidity as a % of Assets 1.44% 1.41% 5.49% 4.13% 3.19% 3.85% 7.07% 8.58% 2018 2019 2020 2021 Well - Managed Excess Cash in Current Environment In an environment with unprecedented levels of excess liquidity, BWB has been able to deploy liquidity into robust loan growth in 2021, instead of holding it in cash BWB Peer Bank Median 1 1 Includes publicly - traded banks with total assets between $2 billion and $10 billion as of December 31, 2021 (Source: S&P Capita l IQ) Dollars in millions 106.7% 104.9% 93.0% 95.7% 2018 2019 2020 2021 Cash and Cash Equivalents / Assets Ratio Recent deposit inflows have lowered the loan - to - deposit ratio, but we remain comfortable operating at 100% or above Loan - to - Deposit Ratio Below 100% |
| 2022 Strategic Priorities – Building on Our Momentum 26 Continue Balance Sheet Growth Trajectory 1 2 3 4 Invest in Business Scalability to Support Growth Maintain Highly Efficient Operating Model Develop, Retain and Recruit Top Industry Talent • Generate mid - to high - teens loan growth, excluding PPP loans • Twin Cities organic growth opportunities will support growth to $5 billion in assets in the Twin Cities over the next few years • Continue M&A discussions with potential partners • Make proactive investments before we need them • Includes areas such as technology and automation, risk management and project management • Launching industry - leading commercial loan origination system in early 2022 • Leverage strong spread - based revenue generation to drive continued revenue growth • Evaluate potential opportunities to enhance revenue diversification • Maintain expense growth in - line with asset growth • Attract top talent in key growth areas such as lending, credit, treasury management, risk and IT • Develop existing talent through management development programs to enhance skills and promote growth within the company • Meet the evolving needs of our team members – modern amenities in our new corporate center, collaboration, flexibility, ESG focus |
| Corporate Strategy Driving Above - Peer Returns and Value Creation 27 Truly Unconventional Culture Highly Efficient Business Model Robust Balance Sheet Growth Proactive Risk Management Our Culture Driven Organic Growth Story Return on Average Assets 1.16% 1.51% 1.49% 1.24% 1.45% 0.86% 1.18% 1.18% 0.99% 1.24% 2017 2018 2019 2020 2021 BWB Adjusted 1 Peer Bank Median 2 PPNR Return on Average Assets 1 2.30% 2.20% 2.07% 2.09% 2.10% 1.64% 1.68% 1.65% 1.68% 1.58% 2017 2018 2019 2020 2021 BWB Peer Bank Median 2 Return on Average Tangible Common Equity 1 13.60% 14.15% 13.72% 12.75% 15.60% 9.52% 12.50% 12.31% 10.72% 15.03% 2017 2018 2019 2020 2021 BWB Adjusted 1 Peer Bank Median 2 Tangible Book Value Per Share 1 $5.40 $7.22 $8.33 $9.31 $10.98 2017 2018 2019 2020 2021 BWB 1 Represents a Non - GAAP financial measure. See Appendix for Non - GAAP reconciliation. 2 Includes publicly - traded banks with total assets between $2 billion and $10 billion as of December 31, 2021 (Source: S&P Capital IQ) |
| 28 Appendix |
| 4Q21 Earnings Highlights 29 1 Includes a $0.04 negative impact related to the payment of BWB’s first preferred stock quarterly dividend in 4Q21 2 Represents a Non - GAAP financial measure. See Appendix for Non - GAAP reconciliation • Gross loan balances up $107.5 million, or 15.7% annualized from 3Q21 (20.2% ex. PPP) • Deposit balances up $92.1 million, or 12.8% annualized from 3Q21 • Cash balances declined $46.0 million from 3Q21 as excess liquidity helped fund $359.4 million of loan originations and advanc es • Adjusted efficiency ratio 2 of 40.3%, down from 41.5% in 3Q21 • Total revenue of $30.4 million, up 1.2% from 3Q21, driven by $480 thousand of net interest income growth • Core net interest margin 2 of 3.25%, up 3 basis points from 3Q21 • Noninterest expense down $777 thousand, or 5.9% from 3Q21 • Annualized net charge - offs to average loans of 0.00% • Growth - driven provision of $1.2 million, reducing allowance to total loans to 1.43% (ex. PPP) • Nonperforming assets to total assets of 0.02%, in - line with 3Q21 • Tangible common equity ratio 2 of 8.91%, up 10 bps from 3Q21 • Tangible book value per share 2 of $10.98, up 17.9% from December 31, 2020 • Repurchased 3,320 shares of common stock ($54K) at a weighted average price of $16.36 Robust Balance Sheet Growth Continues Highly Efficient Operating Performance Superb Asset Quality Solid Capital Position $0.39 1 Diluted EPS Adjusted Efficiency Ratio 2 Return on Avg. Tangible Common Equity 2 Return on Average Assets PPNR Return on Average Assets 2 1.46% 2.11% 14.78% 40.3% |
| December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, Efficiency Ratio 2017 2017* 2018 2018* 2019 2019* 2020 2020* 2021 2021* 4Q21 4Q21* Noninterest Expense 25,496 $ 25,496 $ 31,562 $ 31,562 $ 36,932 $ 36,932 $ 45,387 $ 45,387 $ 48,095 $ 48,095 $ 12,459 $ 12,459 $ Less: Amortization of Tax Credit Investments - (1,916) - (3,293) - (3,225) - (738) - (562) - (152) Less: Debt Prepayment Fees - - - - - - - (7,043) - (582) - - Less: Amortization Intangible Assets (191) (191) (191) (191) (191) (191) (191) (191) (191) (191) (48) (48) Adjusted Noninterest Expense 25,305 $ 23,389 $ 31,371 $ 28,078 $ 36,741 $ 33,516 $ 45,196 $ 37,415 $ 47,904 $ 46,760 $ 12,411 $ 12,259 $ Net Interest Income 54,173 $ 54,173 $ 64,738 $ 64,738 $ 74,132 $ 74,132 $ 87,964 $ 87,964 $ 109,509 $ 109,509 $ 29,153 $ 29,153 $ Noninterest Income 2,536 2,536 2,543 2,543 3,826 3,826 5,839 5,839 5,309 5,309 1,288 1,288 Less: (Gain) Loss on Sales of Securities 250 250 125 125 (516) (516) (1,503) (1,503) (750) (750) - - Adjusted Operating Revenue 56,959 $ 56,959 $ 67,406 $ 67,406 $ 77,442 $ 77,442 $ 92,300 $ 92,300 $ 114,068 $ 114,068 $ 30,441 $ 30,441 $ Efficiency Ratio 44.4% 41.1% 46.5% 41.7% 47.4% 43.3% 49.0% 40.5% 42.0% 41.0% 40.8% 40.3% Tangible Common Equity & Tangible Common Equity/Tangible Assets December 31, 2017 December 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021 Total Shareholders' Equity 137,162 $ 220,998 $ 244,794 $ 265,405 $ 379,272 $ Less: Preferred Stock - - - - (66,514) Total Common Shareholders' Equity 137,162 220,998 244,794 265,405 312,758 Less: Intangible Assets (3,869) (3,678) (3,487) (3,296) (3,105) Tangible Common Equity 133,293 $ 217,320 $ 241,307 $ 262,109 $ 309,653 $ Total Assets 1,616,612 $ 1,973,741 $ 2,268,830 $ 2,927,345 $ 3,477,659 $ Less: Intangible Assets (3,869) (3,678) (3,487) (3,296) (3,105) Tangible Assets 1,612,743 $ 1,970,063 $ 2,265,343 $ 2,924,049 $ 3,474,554 $ Tangible Common Equity/Tangible Assets 8.26% 11.03% 10.65% 8.96% 8.91% Tangible Book Value Per Share December 31, 2017 December 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021 Book Value Per Common Share 5.56 $ 7.34 $ 8.45 $ 9.43 $ 11.09 $ Less: Effects of Intangible Assets (0.16) (0.12) (0.12) (0.12) (0.11) Tangible Book Value Per Common Share 5.40 $ 7.22 $ 8.33 $ 9.31 $ 10.98 $ Total Common Shares 24,679,861 30,097,274 28,973,572 28,143,493 28,206,566 As of and for the year ended, As of and for the year ended, As of and for the year ended, Reconciliation of Non - GAAP Financial Measures – Efficiency, TCE, TBV, NIM 30 This presentation includes certain non - GAAP financial measures intended to supplement, not substitute for, comparable GAAP measu res. Reconciliations of these non - GAAP financial measures are provided below. The Company believes these non - GAAP financial measures provide useful information to both management and investors to analyze and evaluate the Company’s fin anc ial performance. Because not all companies use the same calculations for these measures, the information in this presentation may not be comparable to other similarly titled measures as calculated by other companies. * Efficiency Ratio is adjusted to exclude the historic tax credit amortization and debt prepayment fees. Dollars in thousands Core Net Interest Margin December 31, 2021 Net Interest Income (Tax-Equivalent Basis) 29,388 $ Less: Loan Fees (1,462) Less: PPP Interest and Fees (1,057) Core Net Interest Margin 26,869 $ Average Interest Earning Assets 3,320,603 $ Less: Avergage PPP Loans (39,900) Core Average Interest Earning Assets 3,280,703 $ Core Net Interest Margin 3.25% As of and for the quarter ended, |
| Reconciliation of Non - GAAP Financial Measures – PPNR 31 This presentation includes certain non - GAAP financial measures intended to supplement, not substitute for, comparable GAAP measu res. Reconciliations of these non - GAAP financial measures are provided below. The Company believes these non - GAAP financial measures provide useful information to both management and investors to analyze and evaluate the Company’s fin anc ial performance. Because not all companies use the same calculations for these measures, the information in this presentation may not be comparable to other similarly titled measures as calculated by other companies. Dollars in thousands Pre-Provision Net Revenue 2017 2018 2019 2020 2021 4Q21 Noninterest Income 2,536 $ 2,543 $ 3,826 $ 5,839 $ 5,309 $ 1,288 $ Less: Gain on sales of Securities 250 125 (516) (1,503) (750) - Total Operating Noninterest Income 2,786 2,668 3,310 4,336 4,559 1,288 Plus: Net Interest Income 54,173 64,738 74,132 87,964 109,509 29,153 Net Operating Revenue 56,959 $ 67,406 $ 77,442 $ 92,300 $ 114,068 $ 30,441 $ Noninterest Expense 25,496 $ 31,562 $ 36,932 $ 45,387 $ 48,095 $ 12,459 $ Less: Amortization of Tax Credit Investments (1,916) (3,293) (3,225) (738) (562) (152) Less: FHLB Advances Prepayment Fees - - - (7,043) - - Less: Debt Prepayment Fees - - - - (582) - Total Operating Noninterest Expense 23,580 $ 28,269 $ 33,707 $ 37,606 $ 46,951 $ 12,307 $ Pre-Provision Net Revenue 33,379 $ 39,137 $ 43,735 $ 54,694 $ 67,117 $ 18,134 $ Plus: Non-Operating Revenue Adjustments (250) (125) 516 1,503 750 - Less: Provision for Loan Losses 4,175 3,575 2,700 12,750 5,150 1,150 Non-Operating Expense Adjustments 1,916 3,293 3,225 7,781 1,144 152 Provision for Income Taxes 10,149 5,224 6,923 8,472 15,886 4,318 Net Income 16,889 $ 26,920 $ 31,403 $ 27,194 $ 45,687 $ 12,514 $ Average Assets 1,451,732 $ 1,777,592 $ 2,114,211 $ 2,617,579 $ 3,189,800 $ 3,403,270 $ Pre-Provision Net Revenue Return on Average Assets 2.30% 2.20% 2.07% 2.09% 2.10% 2.11% As of and for the year ended, |
| Reconciliation of Non - GAAP Financial Measures – Diluted EPS, ROA, ROATCE 32 This presentation includes certain non - GAAP financial measures intended to supplement, not substitute for, comparable GAAP measu res. Reconciliations of these non - GAAP financial measures are provided below. The Company believes these non - GAAP financial measures provide useful information to both management and investors to analyze and evaluate the Company’s fin anc ial performance. Because not all companies use the same calculations for these measures, the information in this presentation may not be comparable to other similarly titled measures as calculated by other companies. Dollars in thousands 2017 2018 2019 2020 2021 4Q21 Net Income 16,889 $ 26,920 $ 31,403 $ 27,194 $ 45,687 $ Less: Preferred Stock Dividends - - - - (1,171) Net Income Available to Common Shareholders 16,889 $ 26,920 $ 31,403 $ 27,194 $ 44,516 $ 11,343 $ Add: Debt Prepayment Fees - - - 7,043 582 Less: Tax Impact - - - (1,676) (151) Net Income, Excluding Impact of Debt Prepayment Fees 16,889 26,920 31,403 32,561 46,118 Net Income,Available to Common Shareholdres, Excluding Impact of Debt Prepayment Fees 16,889 $ 26,920 $ 31,403 $ 32,561 $ 44,947 $ Diluted Weighted Average Shares Outstanding 25,017,690 $ 29,436,214 $ 29,996,776 $ 29,170,220 $ 28,968,286 $ Adjusted Diluted Earnings Per Common Share 0.68 $ 0.91 $ 1.05 $ 1.12 $ 1.55 $ Average Assets 1,451,732 $ 1,777,592 $ 2,114,211 $ 2,617,579 $ 3,189,800 $ Adjusted Annualized ROA 1.16% 1.51% 1.49% 1.24% 1.45% Average Total Shareholders' Equity 128,123 $ 194,083 $ 232,539 $ 258,736 $ 316,237 $ 374,035 $ Less: Average Preferred Stock - - - - (24,915) (66,515) Average Total Common Shareholders' Equity 128,123 $ 194,083 $ 232,539 $ 258,736 $ 291,322 $ 307,520 $ Less: Effects of Average Intangible Assets (3,956) (3,772) (3,582) (3,395) (3,204) (3,132) Average Tangible Common Equity 124,167 $ 190,311 $ 228,957 $ 255,341 $ 288,118 $ 304,388 $ Annualized Return on Average Tangiible Common Equity 13.60% 14.15% 13.72% 10.65% 15.45% 14.78% Adjusted Annualized Return on Average Tangible Common Equity 13.60% 14.15% 13.72% 12.75% 15.60% Diluted EPS, ROA & ROATCE As of and for the year ended, |
