8-K
Bridgewater Bancshares Inc (BWB)
8-K
2023-11-13
For: 2023-11-13
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April 04, 2026
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
November 13, 2023
Date of Report
(Date of earliest event reported)
BRIDGEWATER BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
| <br><br><br><br> | <br><br> | <br><br><br><br> |
|---|---|---|
| Minnesota<br><br>(State or other jurisdiction of<br><br>incorporation) | 001-38412<br><br>(Commission File Number) | 26-0113412<br><br>(I.R.S. Employer<br><br>Identification No.) |
| | 4450 Excelsior Boulevard, Suite 100<br><br>St. Louis Park , Minnesota<br><br>(Address of principal executive offices) | 55416<br><br>(Zip Code) |
Registrant’s telephone number, including area code: (952) 893-6868
Not Applicable (Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class: | Trading Symbol | Name of each exchange on which registered: |
|---|---|---|
| Common Stock, $0.01 Par Value<br><br>Depositary Shares, each representing a 1/100th interest in a share of 5.875% Non-Cumulative Perpetual Preferred Stock, Series A, $0.01 par value per share | BWB<br><br>BWBBP | The NASDAQ Stock Market LLC<br><br>The NASDAQ Stock Market LLC |
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 | Investor Presentation dated November 13, 2023 |
|---|---|
| Exhibit 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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2
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.
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| | Bridgewater Bancshares, Inc. |
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| Date: November 13, 2023 | |
| | By: /s/ Jerry Baack |
| | Name: Jerry Baack |
| | Title: Chairman, Chief Executive Officer and President |
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Exhibit 99.1
| Disclaimer<br>2<br>Forward-Looking Statements<br>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<br>concerning plans, estimates, calculations, forecasts and projections with respect to the anticipated future performance of the Company. These statements are often, but not always, identified by words such as “may”, “might”, “should”,<br>“could”, “predict”, “potential”, “believe”, “expect”, “continue”, “will”, “anticipate”, “seek”, “estimate”, “intend”, “plan”, “projection”, “would”, “annualized”, “target” and “outlook”, or the negative version of those words or other comparable<br>words of a future or forward-looking nature.<br>Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding our business, future plans and strategies,<br>projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are<br>difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these<br>forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: interest rate<br>risk, including the effects of recent and potential additional rate increases by the Federal Reserve; fluctuations in the values of the securities held in our securities portfolio, including as the result of changes in interest rates; business<br>and economic conditions generally and in the financial services industry, nationally and within our market area, including rising rates of inflation and possible recession; the effects of recent developments and events in the financial<br>services industry, including the large-scale deposit withdrawals over a short period of time at Silicon Valley Bank, Signature Bank and First Republic Bank that resulted in the failure of those institutions; loan concentrations in our<br>portfolio; the overall health of the local and national real estate market; our ability to successfully manage credit risk; our ability to maintain an adequate level of allowance for loan losses; new or revised accounting standards, including<br>as a result of the implementation of the Current Expected Credit Loss standard; the concentration of large loans to certain borrowers; the concentration of large deposits from certain clients, who have balances above current FDIC<br>insurance limits; our ability to successfully manage liquidity risk, which may increase our dependence on non-core funding sources such as brokered deposits, and negatively impact our cost of funds; our ability to raise additional capital<br>to implement our business plan; our ability to implement our growth strategy and manage costs effectively; the composition of our senior leadership team and our ability to attract and retain key personnel; talent and labor shortages<br>and high rates of employee turnover; the occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-related incidents, including as a result of sophisticated attacks using artificial<br>intelligence and similar tools; interruptions involving our information technology and telecommunications systems or third-party servicers; competition in the financial services industry, including from nonbank competitors such as credit<br>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<br>legislative and regulatory changes, including in response to the recent failures of Silicon Valley Bank, Signature Bank and First Republic Bank; risks related to climate change and the negative impact it may have on our customers and<br>their businesses; the imposition of 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<br>pandemic), acts of war or terrorism or other adverse external events, including the Israeli-Palestinian conflict and the Russian invasion of Ukraine; potential impairment to the goodwill the Company recorded in connection with our past<br>acquisition; changes to U.S. or state tax laws, regulations and guidance, including the new 1% excise tax on stock buybacks by publicly traded companies; and any other risks described in the “Risk Factors” sections of reports filed by the<br>Company with the Securities and Exchange Commission.<br>Any forward-looking statement made by us in this presentation is based only on information currently available to us and speaks only as of the date on which it is made. The Company undertake no obligation to publicly update any<br>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 otherwise. Certain of the information contained in this presentation is derived<br>from information provided by industry sources. Although the Company believe that such information is accurate and that the sources from which it has been obtained are reliable, the Company cannot guarantee the accuracy of, and<br>have not independently verified, such information.<br>Use of Non-GAAP financial measures<br>In addition to the results presented in accordance with U.S. General Accepted Accounting Principles (“GAAP”), the Company routinely supplements its evaluation with an analysis of certain non-GAAP financial measures. The Company<br>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<br>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<br>that may be presented by other companies. Reconciliations of non-GAAP disclosures to the comparable GAAP measures are provided in this presentation. |
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| The Finest Entrepreneurial Bank<br>3<br>Company Overview Branch-Light Model in Attractive Twin Cities Market<br>Twin Cities<br>Name: Bridgewater Bancshares, Inc.<br>Headquarters: St. Louis Park, MN<br>Ticker: NASDAQ: BWB; BWBBP<br>Assets: $4.6 Billion<br>Loans: $3.7 Billion<br>Deposits: $3.7 Billion<br>Shareholders’ Equity: $416.0 Million<br>Serving a Commercial-Focused Client Base Track Record of Profitability, Growth and Efficiency<br>• CRE lending<br>• Acquisition financing<br>• Construction lending<br>• Affordable housing<br>financing<br>• Long-term multifamily<br>financing<br>• Commercial & business<br>lending<br>• Business / treasury<br>management<br>• SBA lending<br>• 1-4 family rentals<br>• Personal banking<br>CRE,<br>30%<br>Multifamily,<br>C&D,<br>37%<br>10%<br>C&I,<br>12%<br>1-4 Family,<br>11%<br>Consumer,<br>0%<br>$3.7B<br>Business and<br>Personal Banking<br>Commercial<br>Banking<br>Loan Balances<br>• Founded in 2005 by a group of banking industry veterans and local<br>business leaders<br>• Continuous profitability since the third month of operations<br>• Proven stability, growth and profitability through various<br>macroeconomic challenges, including the Great Recession, COVID-19<br>and recent bank failures<br>• Expertise in commercial real estate with a focus in multifamily lending<br>• Efficient operating model, with one of the lowest efficiency ratios in<br>the industry<br>• Organizational focus on risk management with a long track record of<br>superb asset quality Data as of September 30, 2023<br>Current BWB Branch Future Branch Site in Lake Elmo, MN |
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| Jerry Baack<br>Chairman, CEO and President<br>• Former regulator and responsible for all aspects of BWB<br>formation<br>• Lead founder of BWB in 2005<br>• 30+ years of banking experience<br>Jeff Shellberg<br>EVP and Chief Credit Officer<br>• Holding company board member and oversees strong credit and<br>underwriting culture<br>• BWB founding member in 2005<br>• 35+ years of regulatory and banking experience<br>Nick Place<br>Chief Lending Officer<br>• Client-focused while meeting and responding to market<br>demands<br>• Joined BWB in 2007<br>• 16 years of banking experience<br>Mark Hokanson<br>Chief Technology Officer<br>• Proactively drives technology and innovative solutions to support<br>future growth<br>• Joined BWB in 2019<br>• 15 years of financial services technology experience<br>Mary Jayne Crocker<br>EVP and Chief Operating Officer<br>• Implements unique corporate culture and strategic execution<br>• Joined BWB in 2005<br>• 20+ years of financial services experience<br>Joe Chybowski<br>Chief Financial Officer<br>• Strategic insights across the organization including capital and<br>liquidity management<br>• Joined BWB in 2013<br>• 13 years of banking and capital markets experience<br>Lisa Salazar<br>Chief Deposit Officer<br>• Drives accountability and results through initiatives that deliver revenue<br>growth, market share, new business opportunities and market penetration<br>• Joined BWB in 2018<br>• 30 years of banking experience<br>Strategic Leadership Team (SLT) with<br>Broad Skill Sets and Industry Expertise<br>4<br>Approximately 20% of BWB’s common shares were owned by<br>Board and SLT members as of September 30, 2023,<br>demonstrating strong alignment with shareholders |
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| A Culture-Driven Organic Growth Story<br>5<br>Strong Profitability and<br>Shareholder Return Profile<br>Truly Unconventional Culture Highly Efficient Business Model<br>Robust Balance Sheet Growth Proactive Risk Management<br>• Entrepreneurial spirit unlike the culture at a typical<br>bank<br>• Modern headquarters with an open layout<br>promoting team member and client collaboration<br>• Commitment to provide clients with quick<br>answers, responsive support and simple solutions<br>• Continued progress on environmental, social and<br>governance initiatives (ESG)<br>• Long track record of generating above-peer<br>organic loan growth<br>• Emphasis on local commercial real estate and<br>small business clients<br>• M&A-related market disruption has resulted in<br>client and banker acquisition opportunities to<br>support loan and deposit growth<br>• Intentionally slowing loan growth in the current<br>environment to position the balance sheet for<br>more profitable longer term growth<br>• Branch-light model with a commercial real estate<br>focus<br>• Efficient operating philosophy, including<br>networking, banking tools and in-house expertise<br>• Relatively low levels of expenses as a percent of<br>total assets<br>• Efficiency ratio impacted by higher interest rate<br>environment, but consistently among the lowest in<br>the industry<br>• Scaling of risk management function to address<br>emerging risks and support growth plans<br>• Superb asset quality track record<br>• Decisive credit culture including measured risk<br>selection, consistent underwriting, active credit<br>oversight and deep industry experience<br>• Proactively assessing credit and repricing risks<br>given the current economic environment<br>8% Diluted EPS CAGR<br>since 2018<br>12% Tangible book value<br>per share1 CAGR<br>since 2018<br>1 Represents a Non-GAAP financial measure. See Appendix for Non-GAAP reconciliation.<br>2 Includes publicly-traded banks on major exchanges with total assets between $3 billion and $10 billion as of September 30, 2023 (Source: S&P Capital IQ)<br>$7.22<br>$8.33<br>$9.31<br>$10.98 $11.69 $12.37<br>2018 2019 2020 2021 2022 3Q23<br>Tangible Book Value per Share1 |
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| Our Core Values<br>6<br>Unconventional.<br>Our clients notice a difference.<br>Responsive.<br>Under promise, over deliver.<br>Dedicated.<br>Don’t stop until you get it done.<br>Growth.<br>If you aren’t moving forward, where are you going?<br>Accurate.<br>It’s more than just an expectation.<br>6<br>Our Core Values |
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| An Award-Winning Workplace Culture<br>“In today’s environment, it is more important than<br>ever to be able to recruit, retain and develop top<br>talent. At Bridgewater, we have demonstrated an<br>ability to do this through our unconventional culture<br>and employee experience, extensive team member<br>referral network, and even the launch of a new<br>internship program to further enhance our talent<br>pipelines.”<br>Jerry Baack<br>Chairman, CEO and President<br>Top Workplaces<br>Star Tribune<br>2016. 2017. 2018. 2020. 2021.<br>2022. 2023.<br>Best Banks to Work For<br>American Banker<br>2017. 2018. 2020. 2022.<br>Corporate Headquarters<br>Progressive Pay and Benefits<br>Health and Wellness<br>Committee<br>Diversity, Equity and<br>Inclusion Committee<br>Volunteer Paid Time Off<br>Modern, open design with an entrepreneurial spirit tailor-made for<br>team building and collaboration<br>Minimum wage of $20 per hour and discretionary bonuses for all<br>team members regardless of level<br>Providing team member opportunities to support physical fitness,<br>nutrition and mental health<br>Inclusive culture that encourages, supports and celebrates<br>diversity of team members and communities in which we serve<br>Team members receive up to 16 hours of PTO per year for<br>volunteer activities supporting the Community Reinvestment Act<br>7 |
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| A Responsive Service Model<br>8<br>Our clients can expect…<br>• Responsive support and<br>simple solutions<br>• A local bank of choice in a<br>market where many local<br>banks have left<br>• Flexibility, market<br>expertise and strong<br>network connections<br>The “Proven Process” for Our Clients<br>• BEST<br>Business Bank<br>• BEST<br>Small Business<br>Banking<br>• BEST<br>Commercial<br>Mortgage Lender<br>An Award-Winning Client Experience<br>• BEST<br>Business Bank<br>• BEST<br>Community Bank |
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| A Commitment to our Communities<br>9<br>Our communities can expect…<br>Bridgewater’s commitment to<br>investing, lending and volunteering<br>in ways that serve low-to-moderate<br>income segments in the Twin Cities<br>‘Outstanding’ Rating for Community<br>Reinvestment Act Performance<br>FDIC, 2023<br>$315K<br>Total<br>Contributions<br>in 2022<br>1,141<br>Volunteer Hours<br>in 2022<br>Empowering Women in Entrepreneurship<br>In 2021, BWB established the BridgewatHER<br>Network, a women’s networking cohort which<br>brings together successful women in business<br>and female entrepreneurs throughout the Twin<br>Cities to network and share insights<br>• ~175 female<br>entrepreneurs and<br>business leaders<br>• Several events hosted<br>at the BWB Corporate<br>Center throughout the<br>year<br>• Led by BWB’s Chief<br>Operating Officer,<br>Mary Jayne Crocker<br>Mary Jayne Crocker<br>EVP and Chief<br>Operating Officer |
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| Environmental, Social and Governance (ESG)<br>10<br>We are committed to establishing and advancing impactful initiatives that support our<br>corporate responsibility as a growing local bank in the Twin Cities, while regularly sharing our<br>progress with our stakeholders<br>Our ESG<br>Commitment Our ESG Priorities<br>Team Members, Clients<br>and Communities<br>Diversity, Equity<br>and Inclusion<br>Leverage our unconventional corporate culture<br>to leave a positive lasting impact on our team<br>members, clients and communities<br>Ensure strong corporate governance oversight<br>including an effective risk management<br>framework to support a growing organization<br>Create a diverse, equitable and inclusive work<br>environment and community<br>Contribute to a healthier natural environment in<br>the communities in which we live and work<br>Corporate Governance Environmental<br>ESG Oversight<br>• Board-level Nominating and ESG Committee<br>oversees Bridgewater's strategy and practices<br>related to ESG<br>• Management-level ESG Committee focused on<br>developing, implementing and growing a formal<br>ESG program<br>For more about Bridgewater’s commitment, priorities and initiatives related to ESG,<br>please visit our ESG webpage at www.BWBMN.com/about-Bridgewater/esg |
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| Attractive Twin Cities Market<br>Built for Business<br>11<br>#1<br>Fortune 500 companies<br>per capita (16)1<br>Large Corporate Presence<br>#1<br>State with highest<br>average credit score (726)2<br>Credit Worthy Population<br>#1<br>Best place for<br>women entrepreneurs3<br>Women Entrepreneurs<br>#5<br>Top State for<br>Business4<br>State for Business<br>#7<br>Small-business job growth<br>(Minneapolis market)5<br>Business Focus<br>Top 20<br>Most populated area in the U.S.<br>with 3.0% projected<br>population growth by 20286<br>High Growth MSA<br>3.00%<br>1.54%<br>2.14%<br>Twin Cities Midwest US<br>$93,724<br>$70,616 $73,530<br>Twin Cities Midwest US<br>Banking industry disruption caused by M&A activity has led to<br>opportunities for client and talent acquisition in the Twin Cities<br>Banking Industry Disruption<br>2023 Median Household Income ($)7<br>2023 – 2028 Proj. Population Growth (%)⁶<br>1 Source: Minnesota Department of Employment and Economic Development<br>2 Source: Experian – State of Credit, 2021<br>3 Source: Minneapolis-St. Paul Smart AssetTM, 2020<br>4 Source: CNBC, 2023<br>5 Source: Minnesota Department of Employment and Economic Development<br>6 Source: S&P Capital IQ<br>7 Source: S&P Capital IQ, Midwest includes ND, SD, NE, KS, MN, IA, MO, WI, IL, IN and OH |
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| Deposit Market Share Momentum<br>in the Twin Cities Continues<br>12<br>Total Deposits – Minneapolis/St. Paul MSA1<br>2012 2023<br>Market Ripe for Continued Market Share Gains<br>• Top-heavy deposit market (top 2 market share = 61%)<br>• Top 2 have lost market share each of the last eight years<br>(2014: 84% / 2023: 61%)<br>• Very fragmented market after the top 2 with no other traditional<br>bank having market share over 3%<br>• BWB has a 10-year CAGR of 23%, compared to the MSA of 3%<br>• Significant M&A activity in the market over the past several years<br>has created opportunities for talent and client acquisition<br>• BWB has a local banking advantage with only 4 of the top 10<br>banks headquartered in MN<br>1 Source: S&P Capital IQ (data as of June 30th of each year)<br>Rank Bank HQ Branches<br>Deposits<br>($M)<br>Market<br>Share<br>1 Wells Fargo & Co. CA 100 $ 79,407 49.80%<br>2 U.S. Bancorp MN 100 $ 43,088 27.02%<br>3 Ameriprise Financial Inc. MN 1 $ 5,107 3.20%<br>4 TCF Financial Corp. MN 102 $ 4,992 3.13%<br>5 Bank of Montreal CAN 34 $ 2,760 1.73%<br>6 Bremer Financial Corp. MN 30 $ 2,205 1.38%<br>7 Associated Banc-Corp WI 28 $ 1,395 0.87%<br>8 Klein Financial Inc. MN 18 $ 1,129 0.71%<br>9 Anchor Bancorp Inc. MN 15 $ 1,126 0.71%<br>10 Central Bancshares Inc. MN 16 $ 732 0.46%<br>1 7 Bridgewater Bancshares, Inc. M N 2 $ 398 0.25%<br>Top 10 $ 141,941 89.01%<br>MSA Total $ 159,467<br>Rank Bank HQ Branches<br>Deposits<br>($M)<br>Market<br>Share<br>1 U.S. Bancorp MN 84 $ 95,116 40.15%<br>2 Wells Fargo & Co. CA 88 $ 50,360 21.26%<br>3 Ameriprise Financial Inc. MN 2 $ 20,933 8.84%<br>4 Huntington Bancshares Inc. OH 69 $ 6,565 2.77%<br>5 Bank of Montreal CAN 27 $ 6,480 2.74%<br>6 Bremer Financial Corp. MN 19 $ 5,302 2.24%<br>7 Bank of America Corp. NC 18 $ 4,521 1.91%<br>8 State Bancshares, Inc. ND 7 $ 3,958 1.67%<br>9 Old National Bancorp IN 29 $ 3,631 1.53%<br>10 Bridgewater Bancshares, Inc. MN 7 $ 3,609 1.52%<br>Top 10 $ 200,474 84.36%<br>MSA Total $ 237,643 |
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| History of Robust Organic Asset Growth<br>13<br>$1,184<br>$76 $929<br>$1,260<br>$1,617<br>$1,974<br>$2,269<br>$2,927<br>$3,478<br>$4,346<br>$4,557<br>2015 2016 2017 2018 2019 2020 2021 2022 3Q23<br>Organic Acquired Assets<br>Proven ability to consistently generate<br>robust annual asset growth<br>primarily in the Twin Cities market<br>Asset growth has almost exclusively<br>been organic, with the exception of a<br>small bank acquisition in 2016<br>Dollars in millions<br>Ongoing evaluation of potential M&A<br>opportunities to support future growth |
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| Managing Loan Growth in the<br>Current Environment<br>14<br>$3,380<br>$3,569<br>$3,684 $3,736 $3,722<br>3Q22 4Q22 1Q23 2Q23 3Q23<br>Dollars in millions<br>$1,912<br>$2,326<br>$2,819<br>$3,569 $3,722<br>2019 2020 2021 2022 3Q23<br>....We Are Thoughtfully Managing Loan Growth in the Current Environment<br>• 3Q23 loan balances down $13.9M, or 1.5% annualized<br>• YTD loan growth of $152.8M, or 5.7% annualized<br>• Actively managing the balance sheet to better align with funding outlook<br>• More selective by focusing on high quality transactions with seasoned clients<br>• Leveraging sales of participations on new originations<br>• Increased payoffs and paydowns muted loan growth in 3Q23<br>• Expect limited near-term loan growth in the current environment to position the<br>balance sheet for more profitable longer term growth<br>While Unique Catalysts Have Created Robust Loan Growth Opportunities Over the Past Several Years…<br>• Strong brand presence and relationships in the market allow us to get in front of<br>high-quality clients and deals<br>• Operating in a competitive “sweet spot” in the Twin Cities – financing larger deals<br>than community banks, but under the radar of the larger banks<br>• M&A-related market disruption resulting in client and banker acquisition<br>opportunities<br>• Expansion of talented lending and business services teams |
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| CRE NOO<br>26%<br>Multifamily<br>37%<br>C&D<br>10%<br>C&I<br>12%<br>CRE OO<br>4%<br>1-4 Family<br>11%<br>Consumer<br>& Other<br>0%<br>Well-Diversified Loan Portfolio<br>With a Commercial Focus<br>15<br>CRE NOO<br>27%<br>Multifamily<br>21% C&D<br>15%<br>C&I<br>13%<br>CRE OO<br>6%<br>1-4 Family<br>18%<br>Consumer &<br>Other<br>0%<br>$0.8B<br>Evolution of Loan Mix by Type<br>2015 3Q23<br>Intentional mix shift toward Multifamily has aligned with the<br>build-out of talent and expertise in the segment,<br>and continued strong performance<br>Track Record of Successfully Managing<br>Higher Concentrations of CRE and Multifamily Loans<br>Multifamily / Bank Risk-Based Capital<br>CRE (ex. Multifamily) / Bank Risk-Based Capital<br>• Remain comfortable with current CRE concentration levels<br>• CRE concentration (ex. Multifamily) below 300% of bank capital<br>• View Multifamily separate from traditional CRE given its lower risk<br>profile<br>• No net charge-offs over the past five years<br>• Only $62K of net charge-offs since inception<br>$3.7B<br>354% 333% 318% 304% 313% 266% 264% 258% 241%<br>180% 164% 185% 177% 204%<br>190% 219% 257% 254%<br>534%<br>497% 503% 480%<br>517%<br>456% 483% 515% 495%<br>2015 2016 2017 2018 2019 2020 2021 2022 3Q23 |
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| Strong Diversification Across<br>Key Loan Portfolios<br>16<br>5-19<br>Units<br>11%<br>20-49<br>Units<br>25%<br>50-99<br>Units<br>28%<br>100+<br>Units<br>36%<br>Size<br>YoY Growth<br>Go-to-Market<br>Strategy<br>Competitors<br>Growth Outlook<br>Key Stats<br>Portfolio<br>Diversification<br>Multifamily CRE Nonowner Occupied Construction & Development C&I<br>Bank of choice in the Twin Cities<br>market due to proven expertise and<br>service model<br>Knowledgeable lenders with<br>efficient closing processes and<br>ample capacity<br>Responsive support, simple<br>solutions and the local touch<br>entrepreneurs are looking for<br>Strong team focused on creating<br>additional client opportunities<br>JPMorgan Chase, agency lenders,<br>local banks and credit unions<br>Local banks, life insurance<br>companies Local banks Local banks, regional banks<br>Continued appetite given expertise<br>and market opportunities<br>Selective growth appetite given the<br>current environment<br>Increased focus on expanding C&I<br>to increase diversification<br>Limited new growth with balances<br>migrating to other portfolios<br>following the construction phase<br>$3.2M<br>Avg. Loan<br>Size<br>66%<br>Weighted<br>Avg. LTV<br>100%<br>Loans with<br>Pass Rating<br>$2.1M<br>Avg. Loan<br>Size<br>59%<br>Weighted<br>Avg. LTV<br>96%<br>Loans with<br>Pass Rating<br>$544K<br>Avg. Loan<br>Size<br>0.04%<br>5-Year<br>NCOs<br>98%<br>Loans with<br>Pass Rating<br>$1.2M<br>Avg. Loan<br>Size<br>65%<br>Weighted<br>Avg. LTV<br>0.00%<br>5-Year<br>NCOs<br>Unit<br>Type<br>Industrial<br>24%<br>Office<br>20%<br>Retail<br>16%<br>Senior<br>Housing<br>14%<br>Medical<br>Office<br>9%<br>Restaurant<br>2%<br>Hotel<br>1%<br>Other<br>14%<br>Property<br>Type<br>RE, Rental<br>and<br>Leasing<br>42%<br>Constr.<br>16%<br>Manufact.<br>10%<br>Finance &<br>Ins. 7%<br>Prof.<br>Services<br>7%<br>Accom. & Food<br>Service 2%<br>Trade<br>6% Other<br>10%<br>Industry<br>Residential<br>18%<br>Multifamily<br>41%<br>CRE Other<br>18%<br>Land<br>23%<br>Property<br>Type<br>Data as of September 30, 2023<br>$1,379M 37% of<br>portfolio $951M<br>26% of<br>portfolio $459M 12% of $359M portfolio<br>10% of<br>portfolio<br>12% 6% 7% 11% |
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| Managing CRE and Office-Related Risk<br>17 1 Excludes medical office of $87M at September 30, 2023<br>Dollars in millions<br>Addressing CRE NOO Repricing Risk<br>• CRE NOO loans primarily located in the Twin Cities market<br>• Ongoing active client engagement<br>• Clients with maturing loans or resetting rates over<br>the next 12 months<br>• Identify situations of possible cash flow strain<br>• Recommend solutions early in the process<br>Well-Managed CRE NOO Office Exposure1<br>Small CRE NOO<br>Office Portfolio<br>Low Average Loan<br>Size<br>LTVs In-Line with the<br>Total Loan Portfolio<br>5.2%<br>of Total Loans<br>$2.3M<br>Average Loan Size<br>62%<br>Weighted Average LTV<br>CRE NOO Office by Geography<br>Twin Cities<br>Suburban<br>53%<br>Minneapolis-St. Paul CBD<br>13%<br>Minneapolis-St. Paul Non-CBD<br>20%<br>Out-of-State<br>14%<br>$195M<br>• Majority of CRE NOO office<br>exposure in the Twin Cities<br>suburbs<br>• Only 4 loans totaling $35M<br>located in central business<br>districts (CBD)<br>• Only 3 loans totaling $27M<br>outside of Minnesota – out-of-state projects for existing<br>local clients<br>Lower<br>Repricing Risk<br>Fixed-Rate<br>Maturity Schedule Low LTVs<br>81%<br>are Fixed-Rate<br>$146M<br>Maturing Over the<br>Next 12 Months<br>59%<br>Weighted Average LTV |
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| Deposit Growth Momentum Returned in a<br>Challenging Funding Environment<br>18 1 Calculated as the change in ending deposit rate over the change in ending Fed Funds rate from February 2022 to September 2023<br>Dollars in millions<br>25% 27% 30% 26% 21% 14%<br>15%<br>18% 13% 21% 28%<br>26%<br>29% 30% 24%<br>20%<br>14%<br>10% 8% 7%<br>13%<br>18%<br>13%<br>23% 27%<br>$1,823<br>$2,502<br>$2,946<br>$3,417 $3,676<br>2019 2020 2021 2022 3Q23<br>Noninterest-Bearing Transaction Interest-Bearing Transaction<br>Savings and Money Market Time<br>Brokered<br>A Track Record of Strong Deposit Growth …<br>• Strong and growing brand taking market share in the Twin Cities<br>• Expansion of commercial client relationships and treasury management team<br>• New client and banker acquisition opportunities due to M&A disruption<br>• 3Q23 total deposit balances up 10.8% annualized<br>• 3Q23 core deposit1 balances up 11.0% annualized<br>• Impacted by recent bank failures, heightened competition and rising interest rates<br>• Overall mix shift from noninterest-bearing into interest-bearing deposits<br>• Continued to supplement core deposits with wholesale funding to support future loan growth<br>• Loan-to-deposit ratio of 101.3%, down from 108.0% in 1Q23<br>…Impacted by Recent Industry-Wide Funding Challenges, But Core Deposit Growth Momentum Returned in Mid-2023<br>29% 26% 22% 21% 21%<br>15% 13% 18% 20% 21%<br>33% 30% 27% 24% 24%<br>9% 8% 8% 8% 7%<br>14% 23% 25% 27% 27%<br>$3,305 $3,417 $3,411 $3,578 $3,676<br>3Q22 4Q22 1Q23 2Q23 3Q23<br>% of Uninsured<br>Deposits (3Q23)<br>22%<br>Cumulative Total<br>Deposit Beta1<br>49% |
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| A Spread-Based Revenue Model<br>19<br>Industry-Wide Revenue Headwinds in the Current Environment<br>$34,095 $32,893<br>$28,567<br>$25,872 $25,421<br>$1,387 $1,738<br>$1,943<br>$1,415 $1,726<br>$35,482 $34,631<br>$30,510<br>$27,287 $27,147<br>3Q22 4Q22 1Q23 2Q23 3Q23<br>Net Interest Income Noninterest Income<br>Dollars in thousands<br>• Spread-based revenue model with noninterest income<br>typically making up ~5% of total revenue<br>• Strong track record of revenue growth with a 10% revenue<br>CAGR since 2019<br>• Largest components of noninterest income include letter of<br>credit fees and customer service fees<br>• Lack of expense-heavy fee businesses (i.e. mortgage, wealth,<br>etc.) helps to maintain a lower efficiency ratio<br>• Reviewing opportunities to add incremental noninterest<br>income sources moving forward<br>• Material increases to noninterest income most likely to come<br>from M&A<br>Comfortable With Current Spread-Based Revenue Model |
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| Net Interest Income Impacted by<br>Managed Loan Growth as NIM Stabilizes<br>20<br>$32,599 $31,745<br>$27,567<br>$24,928 $24,505<br>$96 $48<br>$2<br>$3 $2<br>$1,400 $1,100<br>$998<br>$941 $914<br>$34,095 $32,893<br>$28,567<br>$25,872 $25,421<br>3.53%<br>3.16%<br>2.72%<br>2.40% 2.32% 3.38%<br>3.05%<br>2.62%<br>2.31% 2.24%<br>3Q22 4Q22 1Q23 2Q23 3Q23<br>Core Net Interest Margin1,2<br>Net Interest Margin1<br>Net Interest Income (ex. interest income<br>on loan fees and PPP loans)<br>Interest Income and fees on PPP loans<br>Loan fees<br>Net Interest Income and Margin Trends Net Interest Margin Drivers<br>Core NIM2 down 7 bps<br>Core NIM Stabilization in 3Q23<br>1 Amounts calculated on a tax-equivalent basis using statutory federal tax rate of 21%<br>2 Excludes loan fees and PPP loan balances, interest and fees; represents a Non-GAAP financial measure,<br>see Appendix for Non-GAAP reconciliation<br>Dollars in thousands<br>(1)<br>(6)<br>(13)<br>(16)<br>(14) (14) (15) (14)<br>(10)<br>(7) (6)<br>(2)<br>1 0<br>Aug.<br>22<br>Sep.<br>22<br>Oct.<br>22<br>Nov.<br>22<br>Dec.<br>22<br>Jan.<br>23<br>Feb.<br>23<br>Mar.<br>23<br>Apr.<br>23<br>May<br>23<br>Jun.<br>23<br>Jul.<br>23<br>Aug.<br>23<br>Sep.<br>23<br>Core NIM1,2 Expansion (Compression) by Month (bps) |
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| A Highly Efficient Business Model<br>21<br>47.4% 49.0%<br>42.0% 41.5%<br>51.6%<br>43.3%<br>40.5% 41.0% 41.2%<br>51.7%<br>59.5%<br>57.4% 56.5% 56.3%<br>60.3%<br>2019 2020 2021 2022 3Q23<br>YTD<br>BWB Adjusted1 BWB Reported1<br>An Efficiency Ratio Consistently Well Below Peers<br>1 Represents a Non-GAAP financial measure. See Appendix for Non-GAAP reconciliation.<br>2<br>Includes publicly-traded banks on major exchanges with total assets between $3 billion and $10 billion as of September 30, 2023 (Source: S&P Capital IQ)<br>What Makes BWB So Efficient?<br>An Efficient Operating Culture With a CRE-Focused, Branch-Light Model<br>~2x<br>as many assets per FTE<br>employee compared to<br>the peer bank median2<br>7<br>Branches<br>(peer bank median2<br>: 37)<br>~5x<br>as many assets per<br>branch compared to<br>the peer bank median2<br>The higher cost of funds associated with a<br>branch-light model is more than offset<br>by lower overall operating expenses<br>Expense Growth Generally In-Line with Assets<br>BWB CAGR Since 2019<br>Asset Growth Revenue Growth NIE Growth<br>20% 10% 12%<br>Total Expenses to Average Earning Assets<br>(3Q23 YTD)<br>1.34%<br>2.55%<br>2.56%<br>1.74%<br>3.90%<br>4.29%<br>BWB Peer Bank Average<br>Peer Bank Median2<br>2<br>Interest Expense / Avg. Earning Assets<br>NIE / Avg. Earning Assets |
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| Leveraging Recent Technology<br>Investments to Support Growth<br>22<br>Client-Facing<br>• Modern platforms and payment<br>options for business and personal<br>clients<br>• Collaborative technology tools<br>integrated into BWB Corporate<br>Center<br>• Cybersecurity threat detection<br>and response<br>Scalable core to support growth outlook<br>Core Banking Platform<br>IT Strategy: improve client interactions, streamline processes,<br>automate activities, and embrace digital transformation<br>IT Decision-Making: driven by unconventional culture, enhancing<br>the client experience and improving organizational efficiencies<br>Recent IT Focus – Make Key Infrastructure Investments to Support Future Growth<br>Loan and Deposit<br>Infrastructure<br>nCino<br>• Enhanced commercial loan<br>origination system that digitizes<br>the end-to-end lending process<br>• Launched in 2022<br>Salesforce<br>• Enhanced customer relationship<br>management for lending and<br>deposit opportunities<br>• Launched in 2022<br>Workflow Automation<br>and Analysis<br>ServiceNow<br>• Scalable workflow automation<br>platform to enhance internal<br>efficiencies<br>• Launched in 2020<br>Snowflake<br>• Real-time data analytics and<br>visualization to support decision-making<br>• Launched in 2021<br>• Integration of recent technology<br>investments across the organization<br>• Leveraging and embracing these<br>investments to maximize<br>operational efficiencies<br>2023 IT Focus |
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| Scaling Enterprise Risk Management<br>Across a Growing Organization<br>23<br>Manage and mitigate dynamic risks while enhancing shareholder value, being responsive to<br>clients, and delivering simple solutions in unconventional ways<br>BWB Risk Management<br>Philosophy<br>Enterprise Risk Management<br>Attributes in Place Today at BWB<br>• Proactively addressing emerging risks across all<br>risk categories<br>• Continuing to scale a risk framework aligned with<br>growth<br>• Leveraging technology to enhance processes and<br>controls while driving responsiveness<br>• Reinforcing operational and financial resilience<br>through all three lines of defense<br>• Making investments to bolster organizational<br>resiliency and vendor/third-party risk<br>management<br>• Proactively making enhancements to ESG and DEI<br>programs as well as committing to recruitment and<br>retention strategies<br>Making Investments to<br>Proactively Identify and Mitigate Emerging Risks<br>Credit<br>Concentration<br>Risk<br>Information and<br>Cybersecurity<br>Risk<br>Enterprise<br>Risk and<br>Compliance<br>Financial Risk<br>• Strong credit underwriting and administration program<br>• Active credit oversight, analytics and portfolio monitoring as well as building upon<br>the bank’s stress testing capabilities<br>• Expertise and specialization in key portfolios, including multifamily<br>• Investment in enhanced infrastructure and security protocols<br>• Proactively leverage technology to meet the evolving digital needs of clients while<br>maintaining safety and security<br>• Effective risk culture and awareness model with ongoing training initiatives and<br>tabletop simulations<br>• Focus on recruitment and retention of highly skilled risk professionals across the bank<br>• Investments in technology to enable scalable and effective governance and oversight<br>• Proactively monitoring internal and external trends to quantify changes in risk profile<br>• Maintain compliance with evolving regulatory expectations<br>• Monitoring and managing the balance sheet with an eye toward economic and<br>interest rate volatility<br>• Actively monitoring, maintaining and strategically deploying liquidity while<br>developing long-term strategies for capital preservation<br>• Continued investments in internal audit framework and SOX implementation |
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| $22,526<br>$34,841<br>$40,020<br>$47,996 $50,585<br>1.18%<br>1.50% 1.42% 1.34% 1.36%<br>2019 2020 2021 2022 3Q23<br>Credit Risk Management and Oversight<br>Driving Superb Asset Quality<br>24 1 Nonaccrual loans plus loans 90 days past due and still accruing and foreclosed assets<br>Dollars in thousands<br>$461<br>$775 $722 $639 $749<br>0.02% 0.03% 0.02% 0.01% 0.02%<br>2019 2020 2021 2022 3Q23<br>Nonperforming Assets1<br>Consistently low NPA levels<br>NPAs % of Assets<br>Allowance for Credit Losses<br>Modest CECL Day 1 impact of $650K on January 1, 2023<br>$205<br>$435<br>$(29)<br>$(276)<br>0.01% 0.02% $111 0.00%<br>(0.01)% 0.00%<br>2019 2020 2021 2022 3Q23<br>YTD<br>Net Charge-Offs<br>Cumulative NCOs of $446K since 2019<br>Net Charge-Offs % of Average Loans<br>$2,695<br>$15,164<br>$22,641<br>$28,049<br>$35,621<br>1.01%<br>4.54% 5.45% 5.52% 6.55%<br>2019 2020 2021 2022 3Q23<br>Substandard Loans<br>Composition is relatively evenly split between CRE and C&I<br>Classified Assets % of Total Bank Capital<br>ACL % of Gross Loans |
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| Credit Risk Management Supports<br>Robust Loan Growth<br>25<br>5-Year Peak Annual Net Charge-off Ratio<br>vs. Peers<br>5-Year Peak Nonperforming Assets2 / Assets<br>vs. Peers<br>0.02%<br>BWB Peer Bank Median1<br>0.16%<br>0.03%<br>BWB Peer Bank Median1<br>0.58%<br>1 Includes publicly-traded banks on major exchanges with total assets between $3 billion and $10 billion as of September 30, 2023 (Source: S&P Capital IQ)<br>2 Nonaccrual loans, loans 90 days past due and foreclosed assets<br>Consistent Asset Quality<br>Outperformance vs. Peers<br>Consistent<br>Underwriting<br>Standards<br>Active<br>Credit Oversight<br>Experienced Lending<br>and Credit Teams<br>• Growth continues to<br>primarily be in-market<br>with over 80% of real<br>estate loan balances in<br>the Twin Cities market<br>• No new lending areas<br>or significant changes<br>in portfolio<br>composition –<br>continued focus on<br>multifamily expertise<br>• Growth is a function of<br>enhanced brand,<br>market disruption<br>(M&A), favorable<br>economics and<br>expanding lending staff<br>• No individual lending<br>authorities<br>• Enhanced credit<br>concentration<br>monitoring<br>• Expanded covenant<br>testing and assess<br>repricing risk on<br>maturing loans<br>• 30-89 days past due<br>loans of less than<br>0.05% for 23<br>consecutive quarters<br>• Continued build-out of<br>the credit team to<br>support loan growth<br>and credit risk review<br>• Solid lender and credit<br>analyst expertise<br>across segments,<br>geographies and<br>relationships |
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| High Quality Securities Portfolio<br>26<br>35% 43% 41% 41% 38%<br>31% 24% 23% 24% 22%<br>20% 20% 21% 21% 22%<br>13% 13% 15% 14% 18%<br>$542 $549 $559 $538 $553<br>3Q22 4Q22 1Q23 2Q23 3Q23<br>Mortgage-Backed Securities Municipal Bonds<br>Corporate Securities Other<br>Securities Available for Sale Portfolio<br>AAA,<br>23%<br>AA,<br>46%<br>A,<br>3%<br>BBB,<br>13%<br>NR,<br>15%<br>Rating Mix<br>Derivatives Portfolio Offsetting AOCI Impact<br>$(47,884)<br>$(62,216)<br>$28,581 $34,145<br>$(17,942) $(23,766)<br>4Q22 3Q23<br>MTM Securities MTM Derivatives Net Impact on AOCI1<br>• No held-to-maturity securities<br>• Securities portfolio average duration of 5.0 years<br>• Average securities portfolio yield of 4.39%<br>• Unrealized losses on AFS securities were 15.0% of<br>stockholders’ equity<br>• AOCI / Total RBC of 4.0% vs. peer bank median of 9.2%2<br>1 Includes the tax-effected impact of $7,232 in 4Q22 and $9,583 in 3Q23<br>2 2Q23 median for publicly-traded banks on major exchanges with total assets between $3 billion and $10 billion (Source: S&P Capital IQ)<br>Dollars in thousands |
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| Ample Liquidity and Borrowing Capacity<br>27 1 Excludes $164M of pledged securities at September 30, 2023<br>Dollars in millions<br>14.0% 13.7% 10.9% 9.6% 10.2%<br>20.1% 17.0%<br>30.9% 33.1%<br>37.6%<br>$1,409 $1,380<br>$1,924 $1,962<br>$2,181<br>3Q22 4Q22 1Q23 2Q23 3Q23<br>Off-Balance Sheet Liquidity as a % of Assets<br>On-Balance Sheet Liquidity as a % of Assets<br>Liquidity Position with 2.7x Coverage of Uninsured Deposits Diverse Liquidity Mix<br>2023 YTD Liquidity Actions<br>• Added $801M of on- and off-balance sheet liquidity YTD<br>• $864M increase in borrowing capacity with the FRB following<br>additional loan and securities pledging<br>• $125M increase in FHLB borrowing capacity<br>• $30M increase to cash and cash equivalents<br>• Did not utilize any borrowings from the Discount Window or the Bank<br>Term Funding Program (BTFP) in 2023 YTD<br>Funding Source 9/30/2023 12/31/2022 Change<br>Cash $ 78 $ 4 8 $ 3 0<br>Unpledged Securities1<br> 389 549 (160)<br>FHLB Capacity 516 391 125<br>FRB Discount Window 1,022 158 864<br>Unsecured Lines of Credit 150 208 (58)<br>Secured Line of Credit 26 26 (0)<br> Total $ 2,181 $ 1,380 $ 801<br>Available Balance |
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| Prudent Capital Management<br>28<br>Total Risk-Based Capital Common Equity Tier 1 Capital<br>Capital Ratios Supported by Profitability and Capital Markets Activity<br>Tangible Common Equity to Tangible Assets1<br>1 Represents a Non-GAAP financial measure. See Appendix for Non-GAAP reconciliation.<br>BWB Capital Priorities<br>Tier 1 Leverage Ratio<br>1<br>2<br>3<br>Organic Growth<br>Share Repurchases<br>M&A<br>4 Dividends<br>Drive profitability by supporting a robust and proven organic loan<br>growth engine<br>Opportunistically return capital to shareholders by buying back<br>stock based on valuation, capital levels and other uses of capital;<br>being more cautious in the current environment<br>Review and evaluate corporate development opportunities that<br>complement BWB’s business model<br>Have not historically paid a common stock dividend given robust<br>loan growth opportunities<br>9.98%<br>9.55% 9.41% 9.47% 9.62%<br>8.47% 8.40% 8.48% 8.72% 9.07%<br>13.78%<br>13.15% 13.25%<br>13.50%<br>13.88%<br>7.57% 7.48%<br>7.23% 7.39% 7.61%<br>3Q22 4Q22 1Q23 2Q23 3Q23 |
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| Near-Term Expectations<br>29<br>• Limited near-term loan growth in the current environment; position the balance sheet for more profitable longer term growth<br>• Focus on aligning loan growth more closely with core deposit growth over time<br>• Continued core deposit growth over time, but may not be linear quarter-over-quarter<br>• Target loan-to-deposit ratio between 95% and 105%<br>Balance Sheet<br>Growth<br>• Near-term stabilization as net interest margin compression continues to slow<br>• Dependent on the path of interest rates, shape of the yield curve, and pace of core deposit growth and loan payoffs<br>Net Interest<br>Margin<br>• Ongoing noninterest expense growth, with continued investments in people and technology initiatives<br>• Noninterest expense growth aligned with asset growth over time<br>• Maintain lower provision expense given unfunded commitment decline and limited near-term loan growth outlook<br>Expenses<br>• Build tangible common equity and CET1 ratios, aided by retained earnings and limited pace of loan growth<br>• Ongoing evaluation of potential share repurchases<br>Capital<br>Levels |
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| 2023 Strategic Priorities –<br>Positioning for Long-Term Success<br>30<br>Manage High Quality<br>Balance Sheet Growth 1<br>2<br>3<br>4<br>Maintain High Efficiency<br>While Investing in the<br>Business<br>Continue Scalability of<br>ERM Function, Including<br>Proactive Assessment of<br>Asset Quality Risks<br>Implement Longer Term<br>Strategic Readiness<br>Initiatives<br>• Slower pace of balance sheet growth in the current environment<br>• Manage the balance sheet to optimize net interest income<br>• Increase emphasis on generating core deposit growth to support loan<br>growth over the course of 2023<br>• Identify opportunities to better manage the discretionary spend to align<br>expense growth with a slower pace of asset growth<br>• Continue to invest in people and technology<br>• Make proactive investments to scale the business and position for<br>longer-term growth<br>• Continued build-out of the enterprise risk management function, including<br>enhanced stress testing capabilities<br>• Ongoing monitoring of the loan portfolio for signs of credit weakness given<br>the economic uncertainty heading into 2023<br>• Expand covenant testing and assess repricing risk on maturing loans<br>• Complete CECL adoption in early 2023<br>• Expand C&I function to support further diversification of the loan portfolio<br>and new deposit growth channels over time<br>• Continue evaluating potential M&A opportunities and be ready to act as<br>the right opportunity becomes available<br>Year-to-Date Progress<br>Core deposit growth outpaced<br>loan growth over the past two quarters<br>YTD NIE growth of 6.0% (vs. 2022),<br>compared to YoY asset growth of 10.4%<br>Ongoing 12-month forward assessment<br>of loan covenants and repricing risks<br>Expanding C&I outreach to targeted<br>verticals including women business<br>leaders and entrepreneurs |
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| APPENDIX<br>31 |
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| 0.02%<br>3Q23 Earnings Highlights<br>32<br>• Deposit balances up $97.6 million, or 10.8% annualized, from 2Q23, including core deposit2 growth of 11.0% annualized<br>• Borrowings declined $162.4 million, or 29.5%, from 2Q23, with no overnight borrowings as of September 30, 2023<br>• Loan balances declined $13.9 million, or 1.5% annualized, from 2Q23, impacted by increased payoffs and paydowns<br>• Loan-to-deposit ratio of 101.3%, down from 104.4% at June 30, 2023<br>• Net interest margin (NIM) of 2.32%, down 8 bps from 2Q23<br>• September 2023 NIM of 2.30%, down 3 bps from June 2023 NIM of 2.33%<br>• Yield on interest-earning assets of 5.14%, up 8 bps from 2Q23<br>• Total cost of funds of 3.10%, up 19 bps from 2Q23<br>• Noninterest expense up $1.0 million, or 6.7%, from 2Q23<br>• 2023 YTD noninterest expense up $2.5 million, or 6.0%, from 2022 YTD<br>• Noninterest expense to average assets of 1.35% annualized, up 6 bps from 2Q23<br>• Annualized net charge-offs to average loans of 0.01%, up 1 bp from 2Q23<br>• Nonperforming assets to total assets of 0.02%, in-line with 2Q23<br>• No provision for credit losses; well-reserved with allowance to total loans of 1.36%<br>Enhanced Balance<br>Sheet Composition<br>Net Interest Margin<br>Shows Signs of<br>Stabilization<br>Well-Controlled<br>Expenses YTD<br>Superb<br>Asset Quality<br>$0.30<br>Diluted<br>EPS<br>Nonperforming Assets<br>to Total Assets<br>Efficiency<br>Ratio1<br>Return on<br>Average Assets<br>Return on Avg. Tangible<br>Common Equity1<br>0.85% 9.92% 56.5%<br>1 Represents a Non-GAAP financial measure. See Appendix for Non-GAAP reconciliation<br>2 Core deposits are defined as total deposits less brokered deposits and certificates of deposit greater than $250,000 |
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| Reconciliation of Non-GAAP Financial<br>Measures – Efficiency, TCE, TBV, NIM<br>33 * Efficiency Ratio is adjusted to exclude the historic tax credit amortization, debt prepayment fees and FHLB advance prepayment income<br>Dollars in thousands<br>December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31,<br>Efficiency Ratio 2019 2019* 2020 2020* 2021 2021* 2022 2022* 3Q23 3Q23*<br>Noninterest Expense $ 36,932 $ 36,932 $ 45,387 $ 45,387 $ 48,095 $ 48,095 $ 56,620 $ 56,620 $ 43,921 $ 43,921<br>Less: Amortization of Tax Credit Investments - (3,225) - (738) - (562) - (408) - (341)<br>Less: Debt Prepayment Fees - - - (7,043) - (582) - - - -<br>Less: Amortization Intangible Assets (191) (191) (191) (191) (191) (191) (191) (191) (91) (91)<br>Adjusted Noninterest Expense $ 36,741 $ 33,516 $ 45,196 $ 37,415 $ 47,904 $ 46,760 $ 56,429 $ 56,021 $ 43,830 $ 43,489<br>Net Interest Income $ 74,132 $ 74,132 $ 87,964 $ 87,964 $ 109,509 $ 109,509 $ 129,698 $ 129,698 $ 79,860 $ 79,860<br>Noninterest Income 3,826 3,826 5,839 5,839 5,309 5,309 6,332 6,332 5,084 5,084<br>Less: FHLB Advance Prepayment Income - - - - - - - - - (792)<br>Less: (Gain) Loss on Sales of Securities (516) (516) (1,503) (1,503) (750) (750) (82) (82) 6 6<br>Adjusted Operating Revenue $ 77,442 $ 77,442 $ 92,300 $ 92,300 $ 114,068 $ 114,068 $ 135,948 $ 135,948 $84,950 $ 84,158<br>Efficiency Ratio 47.4% 43.3% 49.0% 40.5% 42.0% 41.0% 41.5% 41.2% 51.6% 51.7%<br>Tangible Common Equity &<br>Tangible Common Equity/<br>Tangible Assets<br>December 31,<br>2019<br>December 31,<br>2020<br>December 31,<br>2021<br>December 31,<br>2022 3Q23<br>Total Shareholders' Equity $ 244,794 $ 265,405 $ 379,272 $ 394,064 $ 415,960<br>Less: Preferred Stock - - (66,514) (66,514) (66,514)<br>Total Common Shareholders' Equity 244,794 265,405 312,758 327,550 349,446<br>Less: Intangible Assets (3,487) (3,296) (3,105) (2,914) (2,823)<br>Tangible Common Equity $ 241,307 $ 262,109 $ 309,653 $ 324,636 $ 346,623<br>Total Assets $ 2,268,830 $ 2,927,345 $ 3,477,659 $ 4,345,662 $ 4,557,070<br>Less: Intangible Assets (3,487) (3,296) (3,105) (2,914) (2,823)<br>Tangible Assets $ 2,265,343 $ 2,924,049 $ 3,474,554 $ 4,342,748 $ 4,554,247<br>Tangible Common Equity/Tangible Assets 10.65% 8.96% 8.91% 7.48% 7.61%<br>Tangible Book Value Per Share<br>December 31,<br>2018<br>December 31,<br>2019<br>December 31,<br>2020<br>December 31,<br>2021<br>December 31,<br>2022 3Q23<br>Book Value Per Common Share $ 7.34 $ 8.45 $ 9.43 $ 11.09 $ 11.80 $ 12.47<br>Less: Effects of Intangible Assets (0.12) (0.12) (0.12) (0.11) (0.11) (0.10)<br>Tangible Book Value Per Common Share $ 7.22 $ 8.33 $ 9.31 $ 10.98 $ 11.69 $ 12.37<br>Total Common Shares 30,097,274 28,973,572 28,143,493 28,206,566 27,751,950 28,015,505<br>As of and for the year ended,<br>As of and for the year ended,<br>As of and for the year ended,<br>Year-to-date<br>Net Interest Margin September 30, 2023<br>Net Interest Income (Tax-Equivalent Basis) $ 25,822<br>Less: Loan Fees (914)<br>Less: PPP Interest and Fees (2)<br> Core Net Interest Margin $ 24,906<br>Average Interest Earning Assets $ 4,416,424<br>Less: Average PPP Loans (828)<br> Core Average Interest Earning Assets $ 4,415,596<br>Core Net Interest Margin 2.24%<br>As of and for the quarter ended, |
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