Jerry Baack
About Jerry Baack
Founder-CEO and Chairman of Bridgewater Bancshares (director since 2005), age 58, with 35+ years of commercial banking and regulatory experience (FDIC and multiple Minnesota banks); B.S. from Minnesota State University, Mankato; alumnus of the Graduate School of Banking at Colorado . Performance context: 2024 net income was $32.8 million vs. $40.0 million in 2023 and $53.4 million in 2022, while the Company’s cumulative TSR index ended 2024 at 108.17 (peer Nasdaq Bank Index at 155.92); management emphasizes PPNR and individual goals in pay design . Governance alignment signals include a 96.25% say‑on‑pay approval at the 2024 meeting and a formal clawback/anti‑hedging framework; risks include 300,000 CEO shares pledged and a combined Chair/CEO role mitigated by a Lead Independent Director .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Federal Deposit Insurance Corporation (FDIC) | Various regulatory roles (not individually specified) | Prior to 2005 | Built regulatory and credit risk foundation used to form BWB |
| Commerce Bank; First State Bank of Excelsior; Hampton Bank (MN) | Commercial banking roles (not individually specified) | Prior to 2005 | Local market, credit, and underwriting expertise; informed niche strategy |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Marquette University – Commercial Banking Program | Advisory Board Member | Not disclosed | Talent pipeline and industry linkages supporting BWB’s strategy |
Fixed Compensation
Multi‑year compensation (CEO):
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Salary | $650,000 | $650,000 | $650,000 |
| Bonus (discretionary) | $526,500 | $0 | $0 |
| Stock Awards (RSUs, grant-date value) | $0 | $351,679 | $203,937 |
| Option Awards (grant-date value) | $528,339 | $0 | $0 |
| Non-Equity Incentive Plan (STI) | $31,058 | $219,000 | $219,000 |
| All Other Compensation | $43,944 | $45,667 | $47,989 |
| Total | $1,779,841 | $1,266,346 | $1,120,926 |
All other compensation (CEO):
| Component | 2024 |
|---|---|
| Perquisites (auto allowance, health club, BOLI economic value, incremental insurance, executive physical) | $23,839 |
| Company 401(k) match + profit share | $24,150 |
| Total “All Other” | $47,989 |
Notes:
- Director pay: Baack receives no additional compensation for Board service .
- CEO pay ratio 2024: 12.2:1 (CEO $1,120,926 vs. median employee $91,770) .
Performance Compensation
Short‑term incentive (STI) design and 2024 outcomes (CEO):
| Metric | Weight | Target Design | 2024 Actual vs. Target | Payout ($) | Payout Notes |
|---|---|---|---|---|---|
| PPNR (Adjusted) | 50% | Threshold $39,113k (50% payout), Target $57,365k (100%), Max $63,102k (150%) | Achieved threshold but below target (after add-back of one-time M&A costs and inclusion of securities gains) | $174,359 | Would have met threshold even without adjustments |
| Individual Goals | 50% | Discretionary assessment of CEO/Company performance | Below historical expectations; 14–34% of target for NEOs | $44,641 | Reflects weaker 2024 financials despite execution on priorities |
| Total STI Paid | — | CEO target 75% of base salary | 34% of base salary | $219,000 | Paid in cash |
Long‑term incentives (LTI) and vesting:
- RSUs granted Feb 2, 2024: 17,152 units; grant‑date value $203,937; vest 25% annually over four years .
- RSUs outstanding (unvested as of 12/31/24): 4,566 (2021 grant), 16,919 (2023 grant), 17,152 (2024 grant); total market value $61,687, $228,576, $231,724 respectively at $13.51 close .
- Options: 150,000 @ $7.47 (2017), 65,000 @ $12.92 (2019), 50,000 exercisable + 50,000 unexercisable @ $17.50 (2022); options vest over 4–5 years; options accelerate on change‑in‑control or death (single‑trigger for options) .
Plan governance:
- No guaranteed annual bonus; minimum RSU vesting of one year; no option repricing without shareholder approval; independent consultant (Pearl Meyer) supports design .
- Clawback policy covering restatements and misconduct; insider trading policy with quarterly trading windows; hedging prohibited .
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| CEO beneficial ownership | 1,492,805 shares; 5.35% of outstanding (27,596,315 shares) |
| Direct/indirect detail | Includes 290,000 options exercisable within 60 days; excludes 25,000 options not yet vested; excludes 44,556 unvested RSUs; includes shares held for children (3,000) and jointly with spouse (7,000) |
| Shares pledged (CEO) | 300,000 shares pledged as collateral (RED FLAG) |
| Options (exercisable / unexercisable) | 150,000 (2017) exercisable; 65,000 (2019) exercisable; 50,000 (2022) exercisable; 50,000 (2022) unexercisable; strikes $7.47/$12.92/$17.50; max term 10 years |
| RSUs unvested (and value) | 4,566 ($61,687), 16,919 ($228,576), 17,152 ($231,724) at $13.51 (12/31/24) |
| Ownership guidelines | Directors: 4× annual cash retainer within 5 years; all are compliant/in progress . NEOs: no formal ownership guideline given high historical insider ownership |
| Anti‑hedging/pledging | Hedging prohibited; pledging not prohibited (disclosed), several insiders (incl. CEO) have pledged shares |
Insider selling pressure indicators:
- Annual RSU vesting cadence (25%/yr) creates predictable supply; options are deeply in‑the‑money (especially 2017/2019 tranches), increasing potential liquidity events during open windows .
- Trading windows: from two full trading days after earnings until two weeks before quarter end .
Employment Terms
| Term | Details |
|---|---|
| Agreement | Effective Jan 1, 2022; CEO term 5 years with auto one‑year renewals unless 90‑day notice; post‑CoC, fixed 2‑year term |
| Non‑compete / Non‑solicit | 12 months; non‑compete within 25 miles of any company office; customer/employee non‑solicit |
| Severance (no CoC) | 100% of base salary (CEO $650,000) + COBRA at employee rates up to 18 months |
| CoC provisions | Cash: 200% of “base compensation” (base + latest cash incentive); example shows $1,738,000 for CEO; equity: RSUs accelerate on double‑trigger (involuntary or good reason in connection with CoC); options accelerate on CoC (single‑trigger) |
| Benefits | COBRA employer portion for up to 18 months (est. $39,353 for CEO) |
| Clawback | Board‑authorized recovery of cash/equity incentives for restatement or specified misconduct |
Board Governance and Service
- Role/tenure: Chairman and CEO; director since 2005; not independent under Nasdaq rules .
- Dual‑role mitigation: Board appoints a Lead Independent Director (David Juran) with agenda/review, executive session, liaison, and shareholder communication responsibilities .
- Board structure: Declassifying; fully declassified by 2026; seven nominees up for one‑year terms in 2025 .
- Committees (all independent members): Audit (Parish, Johnson, Trutna), Compensation (Juran, Urness, Volk), Nominating & ESG (Brezonik, Johnson, Lawal, Trutna, Volk) .
- Attendance: All directors attended at least 75% of Board/committee meetings in 2024; Board held 13 meetings .
- Director compensation: Quarterly retainer $20,000 (50% cash/50% fully‑vested stock unless elected otherwise); Audit Chair additional $5,000/quarter; travel stipend for non‑local directors; executives Baack/Shellberg receive no director fees .
- Related‑party oversight: Special committee formed (non‑interested, non‑employee directors) to approve legacy Greenwood branch lease; multiple disclosed related‑party transactions with arm’s‑length representations (monitor for governance optics) .
Performance & Track Record (select 2024 highlights)
- Core deposits grew $559.4 million (22.0%); excluding First Minnetonka acquisition, +$342.0 million (13.4%) .
- Loan‑to‑deposit ratio reduced to 94.7% from 100.4% (Dec 31, 2023) .
- Asset quality: net charge‑offs/avg loans 0.03%; NPAs/total assets 0.01% .
- Tangible book value per share grew 5.1% to $13.49 (non‑GAAP) .
- Closed acquisition of First Minnetonka City Bank (Dec 2024), adding low‑cost core deposits and optionality .
- Shareholder engagement: engaged institutions representing ~11.5 million shares (~70% of institutional ownership) in 2024 .
- Pay‑versus‑Performance context: Company net income $32.8m (2024) vs. $40.0m (2023), $53.4m (2022); cumulative TSR index 108.17 (Company) vs. 155.92 (Nasdaq Bank Index) at 2024 year‑end .
Compensation Structure Analysis
- Mix shift toward RSUs: 2023–2024 LTI delivered in RSUs (4‑yr ratable vesting); options last granted in 2022—lower risk LTI mix and higher retention emphasis .
- Performance rigor: STI uses PPNR with threshold/target/max and a discretionary individual component; 2024 used “Adjusted PPNR” excluding one‑time M&A costs and including securities gains, but threshold would have been met regardless; individual payouts reduced given weaker financials .
- Governance best practices: no single‑trigger RSU acceleration; no option repricing; no guaranteed bonuses; independent comp consultant; active peer benchmarking (21 regional/commercial bank peer set) .
- Shareholder support: 96.25% say‑on‑pay approval in 2024; annual SOP cadence adopted .
Related Party Transactions (governance red flags to monitor)
- Greenwood branch lease: Bank leases from LLC partly owned by Baack and several directors (each ~12.5% member stake); 2024 payments ~$288k; independent special committee review performed .
- Colliers Mortgage/Securities (Director Juran affiliate): loan participations serviced (fees via pass‑through rate) and brokerage commissions; 2024 servicing fees ~$48k; $500k securities purchased with ~$4k commissions .
- North Shore Development (Urness/Juran owned): $125k in 2024 development fees on company‑owned land .
Director Compensation (for context)
| Director Program | 2024 Terms |
|---|---|
| Retainer | $20,000 per quarter (half cash/half fully‑vested stock unless all‑stock elected); Audit Chair +$5,000/quarter |
| Travel stipend | $1,000 for non‑local, per in‑person meeting |
| Ownership guideline | 4× annual cash retainer within 5 years; compliant/in progress |
Equity and Awards Detail (CEO outstanding at 12/31/24)
| Instrument | Terms | Vesting/Trigger |
|---|---|---|
| Options: 150,000 @ $7.47 (2017) | Expire 9/30/2027 | 20%/yr over 5 yrs; accelerate on CoC or death |
| Options: 65,000 @ $12.92 (2019) | Expire 12/6/2029 | 25%/yr over 4 yrs; accelerate on CoC or death |
| Options: 50,000 exercisable + 50,000 unexercisable @ $17.50 (2022) | Expire 2/1/2032 | 25%/yr over 4 yrs; accelerate on CoC or death |
| RSUs: 4,566 (12/6/2021 grant) | $61,687 value at $13.51 | 25%/yr; double‑trigger accel on CoC, death/disability accel |
| RSUs: 16,919 (2/2/2023 grant) | $228,576 value | Same as above |
| RSUs: 17,152 (2/2/2024 grant) | $231,724 value | Same as above |
Say‑on‑Pay & Shareholder Feedback
- SOP approval: 96.25% in favor at 2024 annual meeting .
- Engagement: outreach to institutions representing ~70% of institutional ownership (~11.5 million shares) during 2024 .
Compensation Peer Group (benchmarking)
- 21 commercial/regional banks (e.g., Lakeland, Mercantile, Nicolet, QCR, Old Second, ConnectOne, Byline); used for pay and design calibration with Pearl Meyer .
Investment Implications
- Alignment strengths: Founder‑CEO with 5.35% ownership; Board/leadership insider ownership referenced as >20% overall; robust clawback and anti‑hedging; declassification underway; strong SOP vote—collectively supportive of long‑term alignment and stability .
- Incentive quality: STI balances objective PPNR with individual goals; LTI in RSUs enhances retention and reduces risk; no guaranteed bonuses; independent comp oversight—supports pay‑for‑performance integrity .
- Watch‑items (potential trading/governance overhangs): 300,000 CEO shares pledged; options are in‑the‑money (potential exercise/sale in windows); predictable RSU vesting supply; legacy related‑party arrangements (though reviewed) may draw optics scrutiny; combined Chair/CEO role (mitigated by capable Lead Director) .
- Retention risk: Employment agreement features (1× salary severance; 2× base comp on CoC; double‑trigger RSU; single‑trigger option accel) and strong insider ownership reduce near‑term departure risk; however, absence of formal NEO ownership guidelines is a modest gap vs. best practice .