Bridgewater Bancshares, Inc._2023 Annual Report

2022 Compared to 2021 Income tax expense was $18.3 million for the year ended December 31, 2022, compared to $15.9 million for the year ended December 31, 2021. The effective combined federal and state income tax rate for the year ended December 31, 2022 was 25.5%, compared to 25.8% for the year ended December 31, 2021. Financial Condition Overview Total assets at December 31, 2023 were $4.61 billion, an increase of $266.3 million, or 6.1%, compared to December 31, 2022. The increase in total assets was primarily due to an increase in cash and cash equivalents, solid organic loan growth and purchases of investment securities. Total gross loans at December 31, 2023 were $3.72 billion, an increase of $154.8 million, or 4.3%, compared to December 31, 2022. The pace of loan growth moderated due to active balance sheet management to align loan growth with the funding outlook, sales of participations on larger originations, and ultimately the impact of the higher interest rate environment on the number of prospective deals that meet underwriting standards. Total liabilities at December 31, 2023 were $4.19 billion, an increase of $234.9 million, or 5.9%, compared to December 31, 2022. Total deposits at December 31, 2023 were $3.71 billion, an increase of $293.4 million, or 8.6%, compared to December 31, 2022. Total borrowings were $412.5 million, a decrease of $64.1 million, or 13.5%, compared to December 31, 2022. Investment Securities Portfolio The investment securities portfolio is used to make various term investments and is intended to provide the Company with adequate liquidity, a source of stable income, and at times, serve as collateral for certain types of deposits or borrowings. Investment balances in the investment securities portfolio are subject to change over time based on funding needs and interest rate risk management objectives. The liquidity levels take into account anticipated future cash flows and are maintained at levels management believes are appropriate to ensure future flexibility in meeting anticipated funding needs. The investment securities portfolio consists primarily of U.S. government agency mortgage-backed securities, municipal securities, and corporate securities comprised primarily of subordinated debentures of banks and financial holding companies. In addition, the Company also holds other mortgage backed and other debt securities, all with varying contractual maturities. These maturities do not necessarily represent the expected life of the securities as the securities may be called or paid down without penalty prior to their stated maturities. All investment securities are held as available for sale. Securities available for sale were $604.1 million at December 31, 2023, compared to $548.6 million at December 31, 2022, an increase of $55.5 million, or 10.1%. At December 31, 2023, government agency mortgage backed securities represented 23.5% of the portfolio, municipal securities represented 21.9% of the portfolio, corporate securities represented 21.6% of the portfolio, other mortgage-backed securities represented 15.5% of the portfolio, asset backed securities represented 14.4% of the portfolio, and SBA securities represented 3.1% of the portfolio.

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