Bridgewater Bancshares, Inc.

Good morning, and welcome to the Bridgewater Bank Shares 2023 fourth quarter earnings. My name is Betsy, 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 withdraw your question, please press star, then two. 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. Please go ahead.

Thank you, Betsy, and good morning, everyone. Joining me on today's call are Jerry Bock, Chairman, President, and Chief Executive Officer, Joe Schabowski, Chief Financial Officer, Jeff Schellberg, Chief Credit Officer, and Nick Place, Chief Lending Officer. In just a few moments, we will provide an overview of our 2023 fourth 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 the call 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 the slide presentation and our 2023 fourth quarter earnings release for more information about risks and uncertainties which may affect us. The information we will provide today is as of and for the fourth quarter and year ended December 31, 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 slide presentation and 2023 fourth quarter earnings release for reconciliations of the 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 to everyone joining us today. As we wrap up 2023, I'm encouraged by the positive trends we began seeing in the third and fourth quarters and how this momentum sets us up for what we anticipate to be a more favorable interest rate and macroeconomic environment in 2024. Net interest margin stabilization trends continued in the fourth quarter as loan yields expanded and the pace of rising funding costs slowed. Joe will talk more about the margin in a few minutes, but overall, we are pleased with the recent trends we have seen. With our liability-sensitive balance sheet, we believe we are well-positioned to benefit from potential rate cuts and a more normalized yield curve in 2024. From a balance sheet perspective, deposit growth continued to outpace our more muted pace of loan growth. Given the environment in 2023, we have been slowing loan growth, building deposits, and optimizing our funding base. As a result, our loan deposit ratio declined to 100% in the fourth quarter, from 108% just a few quarters ago. As we head into 2024, our core deposit pipeline remains strong, and we are seeing signs of loan demand picking up in the Twin Cities. Well-managed expenses have always been a trademark of Bridgewater, and that was no different in 2023. As expected, we saw expenses pick up in the back half of the year, but overall, all year expense growth was just 4.8% in 2023, lower than our 6.1% pace of asset growth. We're able to do this even with continued investments in our people and technology. Asset quality continues to be superb with just one basis points of charge-offs and two basis points of non-performing assets. I continue to be impressed by our client-centric discipline of our lending and credit teams. Our underwriting is consistent, and our outreach and partnership with clients have been very productive. In addition, our multifamily portfolio continues to perform well. I know we get lumped in with some of the more volatile coastal and high-growth markets, but the data shows the Twin Cities market is stable and much more favorable for multifamily. And after 18 years, we have extensive experience in this space. Another true highlight continues to be our consistent tangible book value growth. Tangible book value was up nearly 10% in 2023 and has increased each of the past 28 quarters. Turning to slide four, you can see our tangible book value is up 180% during those 28 quarters, compared to a median of just 50% for banks with $3 to $10 billion in assets. We continue to feel that this is a true differentiator for Bridgewater in a way that we can provide shareholder value going forward. Before I turn it over to Joe, I wanted to share updates on a few other initiatives that our teams have been working on. Our risk team continues to enhance our all-encompassing risk management framework to be scalable to support our longer term growth plans. Our technology team has worked to implement enhancements to improve organization-wide efficiencies and install new data technology to create insights our teams can use to better serve our clients. For example, an upgrade to our commercial client-facing platform was completed in November, providing state-of-the-art technology for our business clients. And at Bridgewater, people are key With our low turnover, we have worked hard to cultivate a growth mindset with our leadership and development program. Many of these are behind-the-scenes efforts, but they are all significant in executing our long-term strategy. With that, I'll turn it over to Joe.