Bridgewater Bancshares' Steady Q3 Growth: Earnings Announcement
Bridgewater Bancshares (BWB), a growing community bank, reported earnings of $0.27 per share for the third quarter on October 30, 2024. The bank demonstrated consistent growth in net interest income and maintained stable net interest margins, alongside a significant increase in core deposits. The anticipated acquisition of First Minnetonka City Bank is expected to further boost liquidity and reduce the bank's concentration in commercial real estate. Bridgewater Bancshares maintained strong asset quality without any net write-offs or increases in problem loans and announced significant leadership changes, positioning itself for modest margin expansion in the next quarter.
Key Highlights
Bridgewater Bancshares reported earnings of $0.27 per share for Q3 2024. Net interest income growth remained stable, with net interest margin steady at 2.24%. Core deposit growth was strong, with an increase of $93 million and a decline of $158 million in brokered deposits. The acquisition of First Minnetonka City Bank is expected to be completed in Q4 2024. Despite strong loan demand, high loan repayments led to a $115 million decline in loan balances. Leadership changes include the appointment of Nick Place as Chief Banking Officer and Lisa Salazar as Chief Operating Officer. The bank anticipates modest margin expansion in Q4 2024, focusing on conservative lending practices.
Company Outlook
Bridgewater Bancshares expects modest margin expansion from Q4 2024 onwards, aided by the acquisition of First Minnetonka City Bank and improved net interest income. The bank is committed to maintaining conservative lending practices and focusing on profitable growth. The loan-to-deposit ratio decreased from 99.8% to 98.3%, indicating a strong deposit base.
Negative Aspects
Loan balances decreased by $115 million due to high loan repayments. The continuation of high loan repayments could keep loan balances flat. The high interest rate environment affected new loan originations.
Positive Aspects
Despite the decline in loan balances, strong loan demand and a solid loan pipeline exist. The bank's fixed-rate loan portfolio is poised to benefit from future Fed rate cuts. Strong capital ratios were reported, with CET1 increasing from 9.41% to 9.79%.
Shortcomings
The company did not plan any share repurchases in the third quarter due to the upcoming acquisition. Organic loan growth was slower than expected.
Q&A Highlights
Management indicated that the high repayments were not tied to specific loan maturities, originating from a mix of 2021 and 2022. Spot deposit costs were about 3.40% as of September 30. Asset growth and expenses for 2024 are anticipated to align in the mid-single digits. Post-acquisition, share repurchase plans will be assessed, focusing on maintaining a CET1 ratio above 9%.
Bridgewater Bancshares remains optimistic about its growth strategy, indicating strong deposit competition in the Twin Cities and a positive response to the Federal Reserve's recent rate reduction. The company's regulatory relationships are positive, as reflected in the swift regulatory approval of the First Minnetonka City Bank acquisition. Management concluded the call with excitement for the bank's core deposit growth and the strategic acquisition expected to close in Q4 2024.
InvestingPro Insights
Bridgewater Bancshares (BWB) demonstrated resilience in a challenging banking environment with its recent earnings report and strategic moves. To complete the article's analysis, InvestingPro data reveals some interesting financial metrics providing additional context on the company's performance and outlook.
As of the latest data, Bridgewater Bancshares has a market value of $416.6 million, reflecting its position as a growing community bank. The company's P/E ratio is 13.67, which is relatively modest and may offer potential value to investors, especially considering the bank's growth initiatives and the anticipated acquisition of First Minnetonka City Bank.
InvestingPro Tips highlight that BWB has been profitable over the last twelve months, consistent with the article's discussion on stable net interest income growth. This profitability is supported by an impressive operating income margin of 45.49% for the trailing twelve months as of Q2 2024, demonstrating efficient operations despite the challenging interest rate environment.
Another relevant InvestingPro Tip notes that BWB delivered high returns over the past year. This is confirmed by a notable 65.59% annual price total return shown in InvestingPro Data, emphasizing that the bank's performance and strategic direction have been positively received by the market.
Despite the article mentioning the bank's focus on profitable growth, an InvestingPro Tip warns that net income is expected to fall this year, potentially due to anticipated expenses related to the First Minnetonka City Bank acquisition and the current high-interest rate environment affecting lending.
For investors seeking more comprehensive information, InvestingPro offers additional tips and data points that can provide a fuller picture of Bridgewater Bancshares' financial health and prospects. Currently, there are 6 extra InvestingPro Tips available for BWB that could provide valuable perspectives for those considering investing in this growing community bank.