Bridgewater Bancshares Inc. BWB has entered into an agreement to acquire First Minnetonka City Bank. The consideration will be fully settled in cash and includes a minimum tier 1 capital requirement by the First Minnetonka City Bank.

Details of the Acquisition Pursued by Bridgewater Bancshares

First Minnetonka City Bank will be merged into Bridgewater Bancshares’ subsidiary, Bridgewater Bank, upon the closing of the transaction, with an anticipated pre-tax merger cost of $2.7 million ($2 million post-tax).

First Minnetonka City Bank, founded in 1964, operates two full-service branches in Minnetonka, MN. As of June 30, 2024, the bank had $242 million in total assets, $212 million in deposits and $128 million in loans and leases.

The combined entity is anticipated to have roughly $4.9 billion in total assets, $4 billion in deposits, $3.9 billion in loans and leases and nine full-service branches across the twin cities.

The deal has been unanimously approved by the board of both companies. It is expected to be closed in the fourth quarter of 2024, subject to regulatory approvals. The operational integration is projected to be completed by the second quarter of 2025.

BWB’s Rationale Behind the Acquisition

The deal is anticipated to be 15% accretive to 2025 earnings per share with a tangible book value (TBV) earn-back period of less than three years.

Bridgewater Bancshares’ TBV is expected to be 5% dilutive with an internal rate of return of 24%. Moreover, BWB will likely benefit from incremental operational efficiencies with expected cost savings of 30% and 50% of First Minnetonka City Bank’s projected non-interest expense base in 2025 and 2026, respectively.

This transaction is likely to improve the deposit mix through a granular core deposit base, creating balance sheet optionality to boost the diversification of the loan portfolio. Also, it will enhance the liquidity profile with a low loan-to-deposit ratio of 61%.
 
Moreover, it will further diversify the revenue mix via incremental fee income through an investment advisory platform alongside reducing the commercial real estate loan concentration.

Jerry Baack, chairman and CEO of Bridgewater Bancshares, stated, “We are very pleased to add a high quality and complementary Twin Cities community bank through a transaction that aligns with and accelerates our strategic priorities.”

Since its inception, Bridgewater Bancshares has been growing organically, driven primarily by commercial real estate lending.  BWB acquired a complementary small bank, adding seasoned core deposits and two branch locations in 2016, thus indicating that the company doesn’t shy away from pursuing strategic acquisitions.