Bridgewater Bancshares, Inc.

Good morning and welcome to the Bridgewater Bank Shares 2023 First Quarter Earnings Call. My name is Jordan 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. To ask a question, please press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To answer your question, please press star then 2. Please note today's call is being recorded. At this time, I would like to introduce Justin Horstman, Director of Investor Relations, to begin the conference call. Please go ahead.

Thank you, Jordan, and good morning, everyone. Joining me on today's call are Jerry Bach, Chairman, President, and Chief Executive Officer, Joe Schabowski, Chief Financial Officer, Jeff Shelberg, Chief Credit Officer, and Nick Place, Chief Lending Officer. In just a few moments, we will provide an overview of our 2023 first quarter financial results. We'll be referencing a slide presentation that is available on the investor relations section of Bridgewater's website, investors.bridgewaterbankmn.com. Following our opening remarks, we'll open it up for questions. During today's presentation, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We caution that such statements are predictions and that actual results may differ materially. Please see the forward-looking statement disclosure in our 2023 first quarter earnings release for more information about risks and uncertainties which may affect us. The information we will provide today is as of March 31st, 2023, and we undertake no duty to update the information. We may also disclose non-GAAP financial measures during this call. We believe certain non-GAAP financial measures, in addition to the related GAAP measures, provide meaningful information to investors to help them understand the company's operating performance and trends, and to facilitate comparisons with the performance of our peers. We caution that these disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP. Please see our 2023 first quarter earnings release for reconciliations of non-GAAP disclosures to the comparable GAAP measures. I would now like to turn the call over to Bridgewater's Chairman, President, and CEO, Jerry Bach.

Thank you, Justin, and thank you, everyone, for joining us today. Before we dive into our financial results for the quarter, I want to take a moment to share our perspective on the current banking environment. There's no question that the bank failures in March have had an adverse impact on the banking sector that are likely to continue for some time. However, we believe the best way forward is to simply continue doing the things that have made us successful for the last 18 years, including providing a differentiated level of service to our clients, growing the bank in a highly efficient manner, and effectively managing and mitigating our risks. We have confidence in this strategy for a variety of reasons. It all starts with our simple business model serving local clients in the Twin Cities that we have known well and have longstanding relationships with. This became even more apparent as we had proactive conversations with clients in March to remind them of our support and offer solutions to put their minds at ease. This included educating them on ways to ensure larger deposit balances, such as leveraging the IntraFi network, which we have had in place for many years. Only 24% of our deposits were uninsured as of March 31st. We also have a strong capital and liquidity position and high-quality securities portfolio with no held-to-maturity securities. We have taken several actions to increase our borrowing capacity without using the new bank term funding programs. and now have available liquidity of $1.9 billion, more than twice the level of uninsured deposits. Finally, we have been proactive in managing our interest rate risk in recent years, including adding derivatives to mitigate the unrealized losses on the securities portfolio. This was evident through 2022 as we were able to continue growing tangible book value even as interest rates continued to rise and our peers experienced material negative impacts to AOCI. Despite the unpredictability in the current environment, I remain confident that BWB can meet the challenges and take full advantage of the opportunity to gain market share. The BWB team is incredibly talented, strong, solution-oriented, and resilient. Our low efficiency ratio is only possible because of the commitment and effort of the hardworking internal team. I'm grateful for the skill and the work ethic of each and every one of our team members. At BWB, the client relationship remains priority number one. This is what has differentiated us in the past, and I strongly believe it is what will lead us to succeed in the future. Turning to slide four, given all the noise in the banking sector and challenging rate environment, we're pleased with our 2023 first quarter results as we earned 37 cents per share. As we indicated on our 2022 fourth quarter earnings call, we expected to see more moderated levels of balance sheet growth and additional margin pressure in the first quarter, both of which we experienced. Loan balances grew at a 13% annualized pace as the loan pipeline slowed and we remained more selective on deals. Deposit balances declined slightly as we saw typical seasonal outflows in March and as we turned much of our attention toward deposit retention initiatives later in the quarter. As expected, this funding pressure resulted in additional margin pressure. Joe will provide more details on the margin in just a minute. Expenses were very well controlled in the first quarter and helped offset some of the near-term revenue headwinds. We maintained a very strong efficiency ratio in the mid-40% range as we execute on opportunities to better manage discretionary spend in the current environment. Asset quality also remained superb with low non-performing assets and our ninth consecutive quarter of no net charge-offs. We adopted CECL during the first quarter and had an impact on our lower net provision due to reduction in unfunded commitments. With that, I'll turn it over to Joe Chbosky.