Bridgewater Bancshares, Inc. Annual Report

Bridgewater Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (dollars in thousands, except share data)

Note 15: Tax Credit Investments The Company invests in qualified affordable housing projects and federal historic projects for the purpose of community reinvestment and obtaining tax credits. The Company’s tax credit investments are limited to existing lending relationships with well-known developers and projects within the Company’s market area. The following table presents a summary of the Company’s investments in qualified affordable housing projects and other tax credit investments at December 31, 2019 and 2018:

December 31, 2019

December 31, 2018

Unfunded Commitment (1) Investment

Unfunded Commitment

Investment

Accounting Method

Investment

Low Income Housing Tax Credit (LIHTC) . . . . . . . . . . . . . . . . . . . . Proportional Amortization $

— $

—

2,148 $

2,436 $

Federal Historic Tax Credit (FHTC) . . . . . . Equity Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,262

3,395

1,814

3,226 3,226

$

4,410 $

3,395 $

4,250 $

(1) All commitments are expected to be paid by the Company by December 31, 2020.

The following table presents a summary of the amortization expense and tax benefit recognized for the Company’s qualified affordable housing projects and other tax credit investments during 2019, 2018 and 2017. Amortization Tax Benefit Expense (1) Recognized (2) Year Ended December 31, 2019 LIHTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 289 $ (330) FHTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,225 (3,687) Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,514 $ (4,017) Year Ended December 31, 2018 LIHTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 310 $ (346) FHTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,293 (3,782) Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,603 $ (4,128) Year Ended December 31, 2017 LIHTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — FHTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,916 (2,225) Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,916 $ (2,225) (1) The amortization expense for the LIHTC investments are included in income tax expense. The amortization for the FHTC tax credits are included in noninterest expense. (2) All of the tax benefits recognized are included in income tax expense. The tax benefit recognized for the FHTC investments primarily reflects the tax credits generated from the investments, and excludes the net tax expense/benefit of the investments’ income/loss.

Note 16: Commitments, Contingencies and Credit Risk Financial Instruments with Off-Balance Sheet Credit Risk

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets.

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