Bridgewater Bancshares (BWB) risk factors, FY2025 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 generally29% rewritten
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 losses56% rewritten
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 prospects48% rewritten
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. 07Elevated levels of inflation could adversely impact our clients’ businesses, adversely impacting our business, financial condition, results of operations and growth prospects93% rewritten
7. 08Our high concentration of large loans to certain borrowers may increase our credit risk39% rewritten
8. 09Affordable housing loans involve unique risks that could adversely affect our businessNew
9. 10Nonperforming assets take significant time and resources to resolve and adversely affect our net interest income29% rewritten
10. 11Liquidity risks could affect our operations and jeopardize our business, financial condition, results of operations and growth prospects
11. 12We depend on non-core funding sources, which causes our cost of funds to be higher when compared to other financial institutions47% rewritten
12. 13Our high concentration of large depositors may increase our liquidity risk, and the loss of any large depositor may negatively impact our net interest margin
13. 14We 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
14. 15We may be adversely affected by changes in the actual or perceived soundness or condition of other financial institutions
15. 44Our business is subject to interest rate risk, and fluctuations in interest rates may adversely affect our earnings32% rewritten
16. 45We could recognize losses on securities held in our securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate41% rewritten
17. 46Monetary policies of the Federal Reserve could adversely affect our financial condition and results of operations45% rewritten
18. 47Our stock is relatively thinly traded
19. 48The price of our common stock could be volatile and other factors could cause our stock price to decline
20. 49An investment in our common stock is not an insured deposit
21. 50We do not intend to pay cash dividends on our common stock in the foreseeable future. Consequently, the ability of shareholders to achieve a return on their investment will depend on appreciation in the price of our common stock
22. 51Future issuances of common stock could result in dilution, which could cause our common stock price to decline
23. 52The 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
24. 53We 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. 16We may not be able to implement our growth strategy or manage costs effectively, resulting in lower earnings or profitability
2. 17We 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 clients26% rewritten
3. 18Compliance with labor and employment laws, including the Family and Medical Leave Act, could increase our costs and negatively affect operationsNew
4. 19The 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
5. 20Issues with the use of artificial intelligence in our marketplace may result in reputational harm or liability, or could otherwise adversely affect our business
6. 21We 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
7. 22Our use of third party vendors and our other ongoing third party business relationships is subject to increasing regulatory requirements and attention
8. 23We 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
9. 24We depend on the accuracy and completeness of information about clients and counterparties
10. 25If we pursue strategic acquisitions, it may expose us to financial, execution and operational risks
11. 26New lines of business, products, product enhancements or services may subject us to additional risks
12. 27We operate in a highly competitive and changing industry and market area and compete with both banks and non-banks
13. 28Severe 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. 29We are subject to commercial real estate lending guidance issued by the federal banking regulators that impacts our operations and capital requirements
2. 30Our risk management framework and programs may not be effective in mitigating risks or losses to us
3. 31Our 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. 32Changes in accounting policies or standards could materially impact our financial statements
5. 33The obligations associated with being a public company require significant resources and management attention, which may divert time and attention from our business operations
6. 34Litigation 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 activities93% rewritten
7. 35We 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 operations42% rewritten
8. 36Changes 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
9. 37We are subject to more stringent capital requirements
10. 38Federal and state regulators periodically examine our business, and we may be required to remediate adverse examination findings
11. 39We 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
12. 40Noncompliance with the Bank Secrecy Act and other anti-money laundering statutes and regulations could result in fines or sanctions against us
13. 41Regulations 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
14. 42The Federal Reserve may require us to commit capital resources to support the Bank
15. 43The 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