Bridgewater Bancshares (BWB) risk factors, FY2024 10-K

Other

1. 01Liquidity and Funding Risks

Market and Interest Rate Risks

1. 02Our loan portfolio has a concentration of commercial real estate loans, which involve risks specific to real estate values and the health and market dynamics of the real estate market generally
2. 03Because a significant portion of our loan portfolio is comprised of real estate loans, negative changes in the economy affecting real estate values and liquidity, as well as environmental factors, could impair the value of collateral securing our real estate loans and result in loan and other losses
3. 04A decline in the business and economic conditions in our market could have a material adverse effect on our business, financial condition, results of operations and growth prospects
4. 05Our business depends on our ability to manage credit risk
5. 06Our allowance for credit losses may prove to be insufficient to absorb potential credit losses in our loan portfolio
6. 07Continued elevated levels of inflation could adversely impact our business, financial condition, results of operations and growth prospects
7. 08Our high concentration of large loans to certain borrowers may increase our credit risk
8. 09The small to midsized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair their ability to repay their loans
9. 10Greater seasoning of our loan portfolio could increase risk of credit defaults in the future
10. 11Nonperforming assets take significant time and resources to resolve and adversely affect our net interest income
11. 12Liquidity risks could affect our operations and jeopardize our business, financial condition, results of operations and growth prospects
12. 13We depend on non-core funding sources, which causes our cost of funds to be higher when compared to other financial institutions
13. 14Our high concentration of large depositors may increase our liquidity risk, and the loss of any large depositor may negatively impact our net interest margin
14. 15Our liquidity is dependent on dividends from the Bank
15. 16We may need to raise additional capital in the future, and if we fail to maintain sufficient capital, whether due to losses, an inability to raise additional capital or otherwise, our business, as well as our ability to maintain regulatory compliance, would be adversely affected
16. 17We may be adversely affected by changes in the actual or perceived soundness or condition of other financial institutions
17. 52Our business is subject to interest rate risk, and fluctuations in interest rates may adversely affect our earnings
18. 53We could recognize losses on securities held in our securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate
19. 54Monetary policies of the Federal Reserve could adversely affect our financial condition and results of operations
20. 55Our stock is relatively thinly traded
21. 56The price of our common stock could be volatile and other factors could cause our stock price to decline
22. 57An investment in our common stock is not an insured deposit
23. 58We do not intend to pay cash dividends on our common stock in the foreseeable future. Consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock
24. 59Future issuances of common stock could result in dilution, which could cause our common stock price to decline
25. 60The holders of our debt obligations and preferred stock will have priority over our common stock with respect to payment in the event of liquidation, dissolution or winding up and with respect to the payment of interest and dividends
26. 61We cannot guarantee that our stock repurchase program will be fully implemented or that it will enhance long-term shareholder value

Operational, Strategic and Reputational Risks

1. 18We may not be able to implement our growth strategy or manage costs effectively, resulting in lower earnings or profitability
2. 19We are highly dependent on our strategic leadership team, and the loss of any of our senior executive officers or other key employees, or our inability to attract and retain qualified personnel, could harm our ability to implement our strategic plan and impair our relationships with clients
3. 20succeed existing key personnel to ensure the continued growth and successful operation of our business. Leadership changes may occur from time to time, and we cannot predict whether significant retirements or resignations will occur or whether we will be able to recruit additional qualified personnel
4. 21Labor shortages and a failure to attract and retain qualified employees could negatively impact our business, financial condition, results of operations and growth prospects
5. 22Our ability to maintain our reputation is critical to the success of our business, and the failure to do so may materially adversely affect our business and the value of our stock
6. 23The occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-related incidents could have a material adverse effect on our business, financial condition, results of operations and growth prospects
7. 24Issues with the use of artificial intelligence in our marketplace may result in reputational harm or liability, or could otherwise adversely affect our business
8. 25We depend on critical systems of third parties, and any systems failures, interruptions or data breaches involving these systems could adversely affect our operations and financial condition
9. 26Our use of third party vendors and our other ongoing third party business relationships is subject to increasing regulatory requirements and attention
10. 27We have a continuing need for technological change, and we may not have the resources to effectively implement new technology or we may experience operational challenges when implementing new technology
11. 28We depend on the accuracy and completeness of information about clients and counterparties
12. 29If we pursue strategic acquisitions, it may expose us to financial, execution and operational risks
13. 30New lines of business, products, product enhancements or services may subject us to additional risks
14. 31We operate in a highly competitive and changing industry and market area and compete with both banks and non-banks
15. 32Severe weather, natural disasters, widespread disease or pandemics, acts of war or terrorism or other adverse external events could significantly impact our business

Legal, Accounting and Compliance Risks

1. 33We are subject to commercial real estate lending guidance issued by the federal banking regulators that impacts our operations and capital requirements
2. 34Our risk management framework and programs may not be effective in mitigating risks or losses to us
3. 35Our accounting estimates, risk management processes and controls rely on analytical and forecasting techniques and models and assumptions, which may not accurately predict future events
4. 36Changes in accounting policies or standards could materially impact our financial statements
5. 37The obligations associated with being a public company require significant resources and management attention, which may divert time and attention from our business operations
6. 38Litigation and regulatory actions, including possible enforcement actions, could subject us to significant fines, penalties, judgments or other requirements resulting in increased expenses or restrictions on our business activities
7. 39anti-money laundering statutes, the Bank Secrecy Act and sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury, or OFAC
8. 40We are subject to extensive regulation, and the regulatory framework that applies to us, together with any future legislative or regulatory changes, may significantly affect our operations
9. 41There is uncertainty surrounding potential legal, regulatory and policy changes by new presidential administrations in the United States that may directly affect financial institutions and the global economy
10. 42Changes in tax laws and regulations, or changes in the interpretation of existing tax laws and regulations, may have a material adverse effect on our business, financial condition, results of operations and growth prospects
11. 43We are subject to more stringent capital requirements
12. 44Federal and state regulators periodically examine our business, and we may be required to remediate adverse examination findings
13. 45We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions
14. 46Noncompliance with the Bank Secrecy Act and other anti-money laundering statutes and regulations could result in fines or sanctions against us
15. 47Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunities
16. 48The Federal Reserve may require us to commit capital resources to support the Bank
17. 49The financial reporting resources we have put in place may not be sufficient to ensure the accuracy of the additional information we are required to disclose as a publicly listed company
18. 50Certain banking laws and certain provisions of our third amended and restated articles of incorporation may have an anti-takeover effect
19. 51Our second amended and restated bylaws have an exclusive forum provision, which could limit a shareholder’s ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees