Bill Gross warns on gold momentum as regional bank stocks tumble
On Thursday, Piper Sandler maintained a positive stance on shares of Bridgewater Bancshares Inc . (NASDAQ:BWB), reiterating an Overweight rating and a $17.00 price target. The firm's confidence in the bank's stock follows Bridgewater's announcement of acquiring First Minnetonka City Bank (FMCB; private) in an all-cash transaction.
The exact cash consideration remains undisclosed, but estimates suggest that Bridgewater Bancshares paid approximately $28 million, or around 1.3 times FMCB's tangible book value (TBV).
The acquisition is expected to result in a 15% earnings per share (EPS) accretion for Bridgewater Bancshares in 2025 and a 5% TBV dilution, with a less than three-year period to earn back the initial investment. The deal is seen as a strategic fit for Bridgewater Bancshares, adding value to its presence in the Minneapolis market.
Moreover, it provides the bank with a lower cost core deposit base and significant liquidity options, as FMCB had a loan-to-deposit ratio of 61% at the end of June, compared to Bridgewater's 100%.
The transaction is anticipated to impact Bridgewater's common equity Tier 1 (CET1) ratio, which is projected to decline to 8.81% upon closing from 9.41% in the second quarter. Despite this, Piper Sandler's analysis suggests that the benefits of the acquisition outweigh the initial dilution, with Bridgewater Bancshares positioned to leverage the additional resources for loan growth or to reduce higher-cost funding.
This deal reinforces Piper Sandler's view of Bridgewater Bancshares as a top small-cap bank in the Midwest with significant potential for profitability and EPS growth, especially in the context of potential future federal rate cuts. The acquisition aligns with Piper Sandler's initial modeling and supports the firm's ongoing endorsement of Bridgewater Bancshares' stock.
In other recent news, Bridgewater Bancshares posted its 2024 second-quarter financial results, highlighting a stabilized net interest margin and a resurgence in revenue growth, a first in nearly two years. Despite subdued loan and deposit growth, the company maintained strong asset quality with no net charge-offs and low non-performing assets. Bridgewater Bancshares also celebrated its 30th consecutive quarter of tangible book value per share growth.
In other company developments, Bridgewater Bancshares was recognized as a top workplace for the fifth consecutive year. The bank also launched a new CRM platform, is developing a new online banking solution, and has made key hires in the treasury and banking areas. Bridgewater Bancshares anticipates more robust payoff levels in the second half of the year and is focused on optimizing the balance sheet for longer-term growth.
InvestingPro Insights
As Bridgewater Bancshares Inc. (NASDAQ:BWB) navigates the strategic acquisition of First Minnetonka City Bank, real-time data and insights can provide investors with an additional perspective on the bank's financial health and market performance.
According to InvestingPro data, Bridgewater Bancshares has a market capitalization of $372.23 million and a Price/Earnings (P/E) ratio of 12.24, reflecting its earnings relative to its share price. Despite a reported revenue decline of 14.27% over the last twelve months as of Q2 2024, the company maintains a robust operating income margin of 45.49%, indicating efficient management of its operations.
InvestingPro Tips highlight that analysts have recently revised their earnings expectations downwards for the upcoming period, which could be a factor for investors to consider. However, it is notable that Bridgewater Bancshares has shown a strong return over the last three months, with a 21.13% increase in its price total return. This performance may instill confidence in investors looking for growth potential.
Moreover, while the company does not pay a dividend, it has been profitable over the last twelve months, which could appeal to investors seeking stable earnings. For those interested in a deeper analysis, InvestingPro offers additional tips on Bridgewater Bancshares, which can be found at https://www.investing.com/pro/BWB.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.