BWB - Earnings call transcript Q2 2024 | Bridgewater Bancshares, Inc.

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Operator

Good morning, and welcome to the Bridgewater Bancshares 2024 Second Quarter Earnings Call. My name is Cole, and I will be your conference operator today. All participants have been placed in a listen-only mode. After Bridgewater's opening remarks, there will be a question-and-answer session. [Operator Instructions] Please note that today's call is being recorded. At this time, I would like to introduce Justin Horstman, Vice President of Investor Relations, to begin the conference call. sir. ahead, go Please

Justin Horstman

and everyone. Cole, good you, morning, Thank

just Joining and President Chief today's overview call of Lending and provide second we Baack, Chairman are Jerry Officer. In Chief Executive Place, financial Financial our and me few an Officer; moments, will on Chief Nick a quarter Officer; results. XXXX Joe Chybowski,

will referencing a on section Relations Investor website, be slide investors.bridgewaterbankmn.com. available We of the presentation that Bridgewater's is

opening remarks, it we'll questions. our Following up open for

more call Bridgewater's like GAAP a accordance Baack. our as for now certain be statements make We meaningful Please CEO, We uncertainties, understand quarter may earnings performance not the addition measures, financial the may actual GAAP and non-GAAP measures, peers. events release projections statements caution the and of and we disclosures to XX, and regarding would presentation, help in during should forward-looking to release this of risks information related our trends turn and performance to that we about substitute company. duty future The us. differ see undertake earnings disclosures GAAP. June the which other update second measures. I viewed the are for non-GAAP XXXX affect the will today's quarter provide the results disclosure information. We is and provide XXXX believe statement in caution of the we the financial Chairman future materially. no and During XXXX, forward-looking with slide We operating information determined results in also measures Jerry may call. performance to that non-GAAP quarter or disclose presentation ended investors comparable or second slide our for presentation such see operating the financial today with these to predictions may to for them of company's over as and reconciliations the information that Please and comparisons facilitate to to

Gerald Baack

for we to thank today. interest and and a compression of seeing first second quarters, Justin, were to pleased of stabilized quarter. us we quality. able in hold saw joining quarter you, coupled XXXX steadily average revenue it interest overall I'm profitability time return few asset slow stabilization you, earning net our third the income steady drive When pace superb a After our since quarter across growth, growth for Thank resulting the revenue margin, everyone, metrics. the margin and over to growth the the with continued asset results, which net showed share second past in

profitability Bridgewater overall and the macro cuts data, As including continued have and past, to a a growth future benefit point impacted well slowing Loan stabilization from we given the Reaching continued were while more us. for the levels deposit is deposit in by the of base. be of bodes said of growth we balance nature deposit quarter. Especially chunky quarter, higher of as and growth margin interest loan normalizing After second positioned to in curve. the strong inflation. yield muted witness rate growth first well sheet more payoffs, was the in encouraging

good The clients, us loan the basis, range. on of and existing to keeping and with As mid-single-digit to continues were team expected conversations a year-to-date market in abreast opportunities. in growth still low new deposit participate

levels charge-offs be continued quarter assets. very Asset very no with low non-performing second of and quality the in to strong net

we've In are us portfolios pleased exceptionally environment, seeing are payoff teams seeing the focus later be for and been the a making I provide everyone and consisting that And in active and talented credit across to Our standards, across underwriting current the our performed. at while us. lending industry with Twin credit worth are the the concentrations, high differentiators will our teams presentation. and CRE experienced multifamily it have been reminding multifamily for oversight and CRE how insight Cities meantime, always discipline continue we have these loans. in and into these we what the more Nick think portfolios, is given

We a loan so is Cities, expertise lot have our we experience and current Twin of in are with why mix. which the comfortable

Finally, first in of per you XX quarters see banks book median assets. up with is billion sub-XX% quarter value Slide tangible X, compared value share the book the X.X% annualized XXth can to our quarter. during nearly this to consecutive tangible growth, marks for $X those On up billion XXX% from $XX

continue shareholder value a provide how and believe will is differentiator this true going Bridgewater we to We forward. for

Before I I working to things Joe, a few been to it over we've want highlight other turn on.

in front, while terms clients, with of a retain launched efficiencies of across interact CRM we grow client we the the as On commitment us new for to how also part changer bank. This win, network, our our will be game and enhancing a platform.

Our product on retail future working new enhancing in updates this client-centric on small clients, for user banking solution business to and also the our a initiative. come team ultimately overall is diligently online experience. More

our Finally, something we culture very always take been has seriously.

row. happen by the by a is we're empowering unconventional We our year for culture. Tribune further be fifth as base so talent. to allowing appreciated to retain and with how top to thrilled employee unconventional an be Star And and a diverse recognized This top attract and demonstrates ultimately culture us the our inclusive corporate in workplace

to and Joe? Joe, in Officer, excited suited to who for Joe can Financial this proceeds President. team. I'll support is being truly a have team ago, that great to what recently a and bring every it Joe are Just encourage of this role turn over Chief collaboration we this our it's role the raffle. charity now our junction. addition in We to happy we elevated about an he like all activities bring weeks capacity. together hour with at off hosted few local capped All well meat team a went

Joseph Chybowski

excited the it's I'm the role so about to new far. with been Jerry. team and collaborate really you, Thank great

at Turning quarter the the continued can offset more which loan The you held during pricing to was portfolio yield, in margin X.XX%. a stabilization flat pressures. driven interest increase meaningful deposit by Slide the X, see net

As an net if are compressed margin like inflection point we last the we felt the even mentioned income bit reaching balance further. on growth quarter, given interest we stronger sheet a

ultimately margin out, quarter interest trends we that balance X.XX%. As points loan increased second was This than it in income driving saw was weaker The uptick supported loan net inflection X, still expected visibility was the up turned of provides loan yield basis components. the portfolio sheet the a second as the higher bit quarter payoffs. Slide growth but more stronger, by margin in X.X%. XX in an into fees, the to also

off expect the vary off continue repricing coming the loan portfolio yields a a based we of the coming sheet loan higher, quarter. on lower increase even may the and on While balance rate to environment, the -- pace given in

in weighted that second overall yields quarter on the loans following basis was second in originations X%, quarter, our sale. points During loan portfolio Note our securities another low X%. The also yields while in yield new XX supporting X.XX%. declined paying the the is securities a asset the average and securities were the balances increased period-end security low to off

see competition to up the continues relief This While to the overall elevated in on increase, some XX pace second to we start pressures albeit until basis to asset quarter. due points a yields deposit mix We at see would have have costs to shifts picked be expect additional portfolio. continued and up, deposit rates. slower within pricing

more As yield our positioned normalized sheet a for curve. well and Jerry mentioned, rates-down balance environment remains a

We lower short-term that positioned rate a even environment. of over rates billion to $X a funding tied repricing is adjustable continue have in higher to loan and portfolio

current potential term, more months cuts expansion we coming levels interest would remain it did relatively likely potential to effect. rate cuts still the stable expect for appears in the near While rate take after than margin ago, with see we net today three near

for Slide interest higher years, to X we driven nearly saw revenue in first Turning time growth the by X, net income. quarter-over-quarter

XX sale a income ROA primarily increased basis securities. ROA a during on second and the of pre-provision points. while both due stabilized As Non-interest gain grew by result, the $XXX,XXX ROTCE to quarter,

However, when have grown total securities the excluding gain. even revenue would

After technology in asset in X.X% saw Nick. a was due to turn year. the would would our expected. in expenses increase employee while first be expenses, and a is in typically far to benefits, of year that, the line FDIC decrease similar strength continue growth XXXX, to salary primarily we a lower The organization. in which half The with business is quarter real of Expenses increasing to to tracked point, I'll the we low higher investments Slide XXXX. With the making by expense. full continues in second partially that offset Turning relatively throughout expect quarter. in occupancy so expenses the what with X, with growth what we saw X% trajectory to the expenses, we remain to manage and over to back our increase in we expect Overall, in expense line ability XXXX it have and

Nicholas Place

Joe. Thanks,

deposits X, in million. Slide flat with down to Turning deposit total the $XX relatively second quarter balances core were

core longer larger our outflows. times, the base timing nature which of always acquisition linear to higher-balance growth onboarding client we've our due and to and As of relationships, deposit not tends includes client said and be inflows

tax tends us season seasonally from for lower industry to quarter In addition, to quarter. see to and second quarter cyclicality. It's inflows the to unusual due for larger deposits and outflows not be

deposit quarter. core in so year-to-date we generated while deposits the million X.X% $XX growth generated example, For loan with we have of total this are first up basis, the On year. far X.X% in X% a are both annualized, up line deposits growth core

leverage mix during to We quarter. the deposits as second deposit changes growth various more specifically see continue to we also broker supplement core deposit

we mix move have On pace. costs see a to funding annualized the continuing slowly These X% to deposits at deposit to hand, are contributed nearly higher. other grow noninterest-bearing pleased changes

repricing our deposit over However, and we funding ability to have broader time. even we ample a Overall, feel growth if about drive lower. good -- move rates or core from lower opportunities rates move if perspective, moderate costs deposit

with moderated deposit similar after increased growth. balances, target our from to is loan the payoffs, to Also XX, growth line which quarter. annualized loan up stronger the middle in remains expectations. in our year-to-date growth Slide first On the Elevated second which last million $XX range. XXX%, contributed bit to is which annualized, basis were a in nearly to of X.X% quarter just of quarter ratio to in Turning slower the under deposit balances loan X.X% our a X.X%

in We see Twin are and strong good getting in loan deals. front Cities continuing of the demand to are

the in equity environment full range. However, caused market haven't other to deals while projects, interest low delay penciled year mid-single-digit has continued to still to rate the loan and growth borrowers high be expect just We challenged some out.

have However, we will overall to conditions initiatives. take are to we year and expecting more appropriate, levels in factors, ability loan talent core the deposit growth economic back to growth engine to a growth. Overall, like new been will into said, disciplined turn half but influence continuing a headwind, lending feel support the the adding we've while our on active be when are of teams which we continue to including That robust to growth we payoff loan our our approach. of continue pace the long-term other demand,

You on loan XX. can in see increase Slide the payoffs

benefits may limit our are potential as there payoffs loan higher growth, While well. overall

mentioned new create production loans as can, are payoffs we can redeploy yields, into higher For below Joe rolling yielding liquidity generally the example, as that off earlier. payoffs

addition, in payoffs the saw which which second loan net we In support income, here quarter. generate interest can fees,

positioned our and portfolio, is just rate large rate makes how of during which New consecutive primarily our of CRE rates strong, Construction any even meaningful see and if deals loan do fixed exceeding loans. originations decline, their phase, reprice construction up development quarter. variable total We continued higher due to the quarter. multifamily This shows XX advances to makes came changes loans second mix the the primarily smaller our portfolio, our decline. to XX% C&I, and to portfolios. Slide to loan while not growth be also loan in as completed continue is balances loan which XX% portfolio for up

floors should larger portfolios over yields have into rate with fixed cuts increasing see of and our adjustable rate loans portfolios coming repricing rates rate maturing We months. should repricing fixed have our impact of transactions higher with if been of redeploy This as yields the the adjustable see our come in rates. provide meaningful over would we and these support X%. million loan even or above the variable able $XXX next on X.XX%, outweigh to repricing funds of variable down. Also, we The now being respectively. We we over drop loan if XX% floors XX-months meaningfully weighted average loans and rate a X.XX% be rate diligent of smaller with yield

only bank our multifamily the overall experienced We Twin even XX, the come confident multifamily of in Twin and our $XX,XXX market rise the we highlights that volatility we stable office portfolios. The started are in historically down. Slide high-growth has rates only and Cities portfolio XX% of multifamily net as market markets. our portfolio, charge-offs continue yields been loans and should Cities are in the since have some of than Over coastal XXXX. with less a to

new absorption have this seen occupancy to remains a throughout you signs even levels tick in rent more the we over exceeding construction Cities. outlook growth past down deliveries months. XXXX, with as and the Couple favorable While vacancy a starting increased and have bit vacancies and of stabilizing levels slow Twin rates few for

been We multifamily proactively pleased the portfolio our and been have across testing covenants very with results. have

issues any plans we For pledges additional collateral mitigants. action principal we that in place, risk have curtailments, other found, or of including have

the closely challenging. economic as rate monitor and We environments the portfolio continue remain interest to

term. performance However, date over multifamily we remain long and on bullish to with pleased have the the been

four million. Looking at business remains our X% includes just of our This non-owner quite occupied loans at districts CRE only portfolio, office $XX loans. totaling central in located exposure limited

potential moved quarters, substandard, reminder, rollover central to risk. one office to a these watch on loans business of As district previous lease due in placed we both and another

suburban closely these facing feel said portfolio monitor office as the about we a this to lower diversified headwinds primarily the client base whole transactions given Midwest the continue given office That amount, will sector. We loan good exposure. average and

continue were reserved We has quarter we which the assets. $XXX,XXX assets XX, entire second the of peer remain again we just X.XX% Slide non-performing well see excess net in our charge-offs is strong had which to during included as performance Reserves levels. of well loan Turning pressure low no to across in expect levels. provision and been good -- loans, and of of at to quarter X.XX% gross of our as substandard growth. That credit said, tied our rate remained see over as loans, Overall, continues this Slide time. On higher can at some put generally on loan environment XX, continue to feel normalization higher loan both which watch businesses, interest still to to portfolio. about you we see we very portfolio

the to profile forward. I'll believe turn risk the of and are with is it We pleased Joe. portfolio well-positioned now moving it over back

Joseph Chybowski

have CETX, Slide capital XX to which Nick. build from increased to Thanks, highlights strong including which ratios, our X.XX% continued X.XX%.

In repurchased have still weighted $X.X at per authorization. of current a quarter $XX.XX a $XX.X of XXX,XXX we total shares the under for share price nearly our second during million We addition, million. remaining average

repurchases are growth based will priorities. of We repurchases future evaluate capital to on levels, Share continue including of conditions. variety capital our and just a factors, market one opportunities

priority remains growth. Our capital primary organic

potential monitor opportunities. review continue we to and Beyond M&A that,

near-term to our Turning Slide recap XX, expectations. I'll

mid-single-digit higher will although full to mentioned, as a expect payoffs loan be remainder year the levels of the remain over to loan year. Nick anticipated headwind low range, growth the in We of likely

see that and are in the interest we yield stabilize second We'd expect margin a We stability to near term in see the cuts curve. pleased continue some quarter. rate to normalized until

on is repricing loan book the there's pressure costs. deposit higher, still While

benefit to mentioned, as we rates As are well-positioned we down. have come

will in in the provision expenses the asset year line XXXX growth of overall to loan we with we to year similar building Jerry. throughout to track prior years. expense as over likely side, a out portfolio. I'll quarters. expect the trajectory includes to XXXX, quality and similar it noninterest be asset in our tied On with full This saw expense relatively now turn and the subsequent in in low growth starting of expense pace first The quarter the

Gerald Baack

on up update quick Slide XXXX Joe. priorities. provide Finishing I'll strategic on a Thanks, XX, our

expected basis. are look deposit balance year-to-date longer-term First, growth to and growth, a as tracking we for our as loan optimize both sheet on

women focus networking and corporate entrepreneurs. leaders additional base business well our for efforts, we as client through events successful our Second, affordable as housing continue to at office local expanding hosting on

to which how new the Third, efficiencies we have of creating we is with the continued our in business, launch our tool clients. CRM including invest engage in

are asset teams multifamily. CRE This continued that, has and our we'll open credit been our portfolios, working to our especially questions. quality. With evident through Finally, hard monitor for up loan strong it

Operator

[Operator Instructions] Nosal And our Please Brendan with go first question today will come Hovde from Group. ahead.

Brendan Nosal

I banks. morning, we've individual capital hearing mean, completely your quality disposal remains guys. Good Hi. but requirements on to pristine credit. heavy start-off just to at here using regulators that are for been increase CRE Maybe tools increasingly their asset

relationship understanding your especially has how their maybe considering for take clean business you your through been us So, model, your and with just regulators of credit historically?

Gerald Baack

had Jerry. the mean, I same XXXX. started it's Brendan, Hi, platform we in basically we've since

be risk regulators. and our We our concentrations they've our how with is what They come And continue certainly asked management do. have have comfortable is down, our not continued that us conversations to to concentrations. enterprise with that overall have although something we monitor to system

to we feel continue So, comfortable.

We have it and kind last business of August usual. and we, here as exam, another our exam in was

I anything So, don't expect different.

Brendan Nosal

Okay. book repurchasing the appetite [indiscernible]? update then up tangible color. can you. above just And us That's your pricing great you has to maybe given continue firmed shares Thank on

Joseph Chybowski

else, we but of being one this I I always we Joe. it's of Obviously, growth factors the mean, itself, environment think, that we like consider Yes, share future opportunities, Hi, a of whether the everything context is the Brendan, think in it's say, consider. variety I that. there's all them, price of

were is kind to we today. of analysis. where able we're at we're active that considering going the a then happy we last costs we'll again the and stock fluid continue evaluate and that's over just shares quarters, forward, But the and that back to pleased really three I as that So were think blended as given buy

Brendan Nosal

sense. more trends to and us right, give to spot a makes sense played quarter Really maybe back. have how the I rates Yes, costs for margin out. level you Do All see me to the out before the just of one happen end great quarter? deposit finally margin both step for at across

Joseph Chybowski

Yes.

So June were for was deposits X.XX%. X.XX%. And then rates spot

Brendan Nosal

Okay, perfect. for taking the questions. Thank you

Operator

Please next Jeff And from come go Davidson. with Rulis our D.A. will question ahead.

Jeff Rulis

morning. Good Thanks.

XX X stat, that were expect do think you do the see, kind basis see expectations an could around, think loan I kind timing of -- encouraging of points wanted than more terms versus to is to you jump yields, you cautious think or acceleration of of we on I for that basis you further acceleration? points in or

Joseph Chybowski

this in quarter. Joe. Yes, we so Jeff, Hi of the quarter in think in had the really loan March think half really second the I is back which I strong yield the really propelled growth first

think I So in linked together. growth think the obviously loan as overall yield, it's about we

certainly I obviously beneficial think mentioned, on I piece new payoff recycle -- as yields one on money us where think the and really debt off, hand. at. on Nick it's I yields than are to less is certainly front, of kind are payoff mean, coming the It allows roll

So beneficial certainly but to yield. the accretive, loan overall it's margin definitely not only

that's helpful. So

basis basis I growth-driven. as So I strong growth X was was quarter in quarter, think linked it it's the you going a prior saw to on not points basis. in to be first X where points think And as quarters

in And second the think propelled the so, the feel yield quarter, quarter. strong like really we the loan I do in that growth first given

Jeff Rulis

cyclicality sort a then from gathering. a QX And from headwind deposit more mentioned it. Nick Got business of of

Now through becomes low that the of that I tailwind? seasonality and in the kind about Is know you year? second do but half gathering deposit typically balance growth, you're better feel sheet a kind that of hugging mid-single-digit

Nicholas Place

for up deposit we've feel and cyclicality about acquisitions. it's we've business here seen in sort just tends typical QX. Yes. client on rebuild watermark about uncommon good treasury us feel our Yes, It new that's this Hi, as of the we've second that tend and -- other really front really to great really hires quarter. tends low We clients in bankers seen deposit brought to in our -- is of us taxes sort we've year Nick. for not some balances the a we what traction good and be we -- low on back this had of the in that And new hires that see board. management to had and

growth over not long-term dividends some QX and us So bit we're that will uncommon a our down yes, that some for see But have pay just now. We that's tend was and quarters. starting to the to of for pipeline us. chunky drive

saw growth. muted. was we core really as quarter then more and And overall First QX, a expected we both bit great deposit

the So, those outflows inflows term. of over expect long continue and sort to we

Jeff Rulis

And Thanks. one last for me.

the thoughts in touched run on you just pretty the I on share area prices about think that check-in here well I side buyback and and the M&A updates. guess well. as as interested recent might up conversations

Nicholas Place

with about can we Jeff. similar banks and I I last last to always talk to bit years local have previous quarter, continue a actually, mean other conversations well. M&A, conversations We've went have those

it's heating in targets M&A of front we'll from in investment on bit the are know things I'd So slow, get front, I see. it's the say what country, but across Cities, along the just that's at little bankers, Twin little the still I least a it's way. the a potential but staying up really -- And

Jeff Rulis

you. Got it. Thank

Operator

ahead. Race Piper Our with from go will Nathan question Instructions] Sandler. Please next come [Operator

Nathan Race

for taking Good questions. Thanks my morning.

Gerald Baack

Hi, Nate.

Nathan Race

your Just costs rates up terms XQ just XQ, of today? the maturing quarter, replacement as the and CDs deposit have in in in increase to the we think kind you curious third that of about in that stacks potential how

Joseph Chybowski

cuts. kind this CDs, Hey, anticipation last definitely the mindful to say shortening think quarters, couple the an ultimate of those Nate, inflection up, point. I of for potential really Joe. of I'd we've is Yes, seen in rate we've maturity over been

we've at is think now CD X%s. low the seen the pricing inflection where X.XX% I in XX-month really So

repricing CD a front, portfolio up those that that off to stuff shortens And and too the have maybe think I ability a to years longer brokered there's we've that lot so, and the of ago, in on able of perspective. I'd definitely couple been opportunities longer-term say a call put certainly while had rolls it as we duration thing inflection other really our CDs. just optionality that CDs on is provides from

a think gets us allows while longer call supplement that and reissue to with from might like I our it feel term that a optionality lot definitely or and way, So, growth. certainly there's perspective disclosed core of

that and deposit inflection terms portfolio of point in time really about good hitting cost. feel So

Nathan Race

great. Okay, And and levels are I payoffs on XQ? expected terms but think have of any if then earlier, visibility touched elevated the the in XQ curious these we you kind of and of in kind quarter, over if as the of just payoff into potential course

Nicholas Place

to I allowed bit. a It's mean, Nick. Yes, drop work those in we year, picking rates the some in did closing which seen time, of we together anticipated transactions we We've last end of to take rates mean, up again happen toward second and that payoff here. of little a I some quarter. stuff saw some and pullback refinance those back do in see come

'XX it again. rebuild within to And that lot of seeing multifamily the that book. had originated A 'XX book to came those intention that pipeline transactions our construction stuff it's payoff. lot our and that of we payout we're was a in our So, had rolled of

already seen has of see to July. it. here of that that payoffs the transactions those actually of So through seen we QX have two-thirds level quarter-to-date, even payoff payoffs within lifecycle the we've trend -- of continued. we We've of experienced in really, it's that expected sort almost all And right

to some to that that overall a different new our And It that. back transactions like more something loan But a driver -- is and back or of an environments and have pain about expect to we that in the working have and environment and allows agency really rate as home these do. some right primary come to out underwritten they with find here. headwind as takeout up, we that felt be we're vintage to rate into 'XX a XXXX, cases, older of increased what were to new those loan continue it's bit little feel us allowing yields dig yields which allows transactions, fees. both of cash recycle us So good that into

of So ultimately, helps too. metrics credit with risk it some us our

a that that we're to So, we is as not to loan growth new something some new it activity of offsets that something is headwind origination but loan have. it concerned or that with,

Nathan Race

over Got then it. yields maybe note Any nicely portfolio the last keep of items mind one or securities last just Very helpful, to Nick. Thank repositioning the housekeeping you. And any there on The there? quarter. taxable increased in other question.

Joseph Chybowski

Yes, sheet. quarter, an Nate, securities this from this from is balance reorienting of of the We're is same the of some in just We definitely kind nature, management floating Joe. ordinary, a of in No, our standpoint. of sell with did portfolio nothing the rest perspective. active more which out more composition a the rate last conjunction

last So, quarters. similar really of ordinary there, nothing couple out the just ordinary had over the course and composition as of we've

Nathan Race

appreciate Thank the all color. you. I great. Okay,

Operator

I back Baack session. conference to any turn over question-and-answer to would our Jerry remarks. conclude will for the this like closing And

Gerald Baack

the today. joining for call Thanks

guess in our to to book our encouraged and We continued overall continue I growth, value. be stabilization, margin superb tangible want members. by, team asset I'd revenue close quality, I growth thank just by our And

brought in We this last and key side. here. team the treasury real hires on more quarter phenomenal on a have We some banking

you that. have So great a Hope excited day. we're for

Operator

for conference today's The concluded. attending is now Thank you presentation.

may You lines at now this disconnect your time.

Bridgewater Bancshares (BWB) 25 Jul 242024 Q2 Earnings call transcript