Bridgewater Bancshares, Inc.

Good morning and welcome to the Bridgewater Bank Shares 2023 second quarter earnings call. My name is Chuck and I'll 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, you may press star then one on your touch tone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. And to withdraw your question, please press star then two. Please note that today's call is being recorded. And at this time, I would like to introduce Justin Horstman, Director of Investor Relations, to begin the conference call. Please go ahead, sir.

Thank you, Chuck, 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 second quarter financial results. We will 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 will 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 second quarter earnings release for more information about risks and uncertainties which may affect us. The information we will provide today is as of June 30th, 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 second 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. I'll start with a quick overview of the second quarter, which is highlighted by some encouraging trends as we continue to work through this challenging banking environment. As we've been indicating, the pace of balance sheet growth continues to slow throughout the year, but we were pleased with the improvement of the balance sheet composition. Not only did we see a strong rebound in total deposit growth, which increased nearly 20% on an annualized basis from the first quarter, our core deposit balances increased 7.4%, outpacing loan growth of 5.6%, essentially aligning growth rates on both sides of the balance sheet. Net interest margin pressure continued during the quarter as expected, as funding costs continued to rise across the industry. On a positive note, we did see the pace of margin compression slow considerably on a month-over-month basis throughout the quarter. Joe will talk more about this in a few minutes. Our expenses remained very well controlled for the second consecutive quarter. This has been intentional and shows that we have the ability to manage expenses as revenue growth slows. Asset quality remained pristine with no net charge-offs, very low levels of non-performing assets, and stable levels of watch and substandard loans. We continue to be very proactive and diligent on this front, but remain pleased with the performance and quality of our loan portfolio. At the end of the day, this all translated to another quarter of tangible book value growth, which is now up over 10% year over year. In fact, we have grown tangible book value every quarter going back to 2016. Before we provide a more detailed look at our results, I want to take a minute to share some thoughts on the business more broadly. We have always believed that staying in front of our clients is priority number one, and we have remained vigilant in this commitment. Be it seasoned clients or potential client opportunities, our lending and treasury teams are prioritizing in-person visits and continue to see record attendance at our networking events. To further expand our reach, we are actively developing a foothold with women decision makers through unconventional events and social channels. These efforts are paying off as we onboard new clients that appreciate our responsive and knowledgeable service model. We have also taken steps to refine our branch-like footprint. Just last week, we relocated our downtown Minneapolis branch to a more premium Skyway location with more space to serve our clients. Minneapolis is an important market, and we remain committed to serving the downtown community. In addition, as we mentioned last quarter, we recently purchased a parcel of land in a higher-growth east metro area for a future de novo branch, which will help us fill out our footprint down the road. Despite the overall uncertainty in the market today, one thing is for certain, and that is the confidence I have in our team. We know that Bridgewater's talent pool runs deep. As a top workplace seven years running, we know that engagement, job satisfaction, and productivity rank incredibly high. We think about the employee experience the same way we think about the client experience, ensuring that Bridgewater is a place people want to develop, grow, build community, and ultimately thrive is our goal. If our people are happy, our clients notice a difference. I firmly believe we have the best bankers in the Twin Cities, and I'm grateful for their commitment to driving the success. With that, I'll turn it over to Joe.