Bridgewater Bancshares, Inc. Annual Report

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

of the last day of the calendar year for which the contribution was made to the plan and accrue interest at a rate equal to the Bank’s return on average equity for the immediately preceding calendar year. Distribution of amounts contributed under the plan, including accrued interest, is made in a lump sum cash payment within 75 days following the date such amounts become vested. As of December 31, 2019 and 2018, the Company had a liability of $3,546 and $2,914, respectively, recorded on the consolidated balance sheets. There were no new contributions made to the plan during the

year ended December 31, 2019. Note 20: Regulatory Capital

Effective January 1, 2015, the capital requirements of the Company and the Bank were changed to implement the regulatory requirements of the Basel III capital reforms. The Basel III requirements, among other things, (i) apply a strengthened set of capital requirements to the Company and Bank, including requirements related to common equity as a component of core capital, (ii) implement a “capital conservation buffer” against risk and higher minimum tier 1 capital requirement, and (iii) revise the rules for calculating risk-weighted assets for purposes of such requirements. The rules made corresponding revisions to the prompt corrective action framework and include the new capital ratios and buffer requirements which were phased in incrementally, with full implementation on January 1, 2019. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain minimum amounts and ratios (set forth in the table and defined in the regulation) of Total Capital to Risk Weighted Assets, Tier 1 Capital to Risk Weighted Assets, Common Equity Tier 1 Capital to Risk Weighted Assets, and Tier 1 Capital to Average Assets. The following tables present the Company and the Bank’s capital amounts and ratios as of December 31, 2019 and 2018:

Minimum Required For Capital Adequacy

For Capital Adequacy Purposes Plus Capital Conservation Buffer

To be Well Capitalized Under Prompt Corrective Action Regulations

Actual

Purposes

December 31, 2019

Amount Ratio Amount Ratio Amount Ratio Amount Ratio

(dollars in thousands) Company (Consolidated): Total Risk-Based Capital . . . . . Tier 1 Risk-Based Capital. . . . . Common Equity Tier 1 Capital . Tier 1 Leverage Ratio. . . . . . . . Bank: Total Risk-Based Capital . . . . . Tier 1 Risk-Based Capital. . . . . Common Equity Tier 1 Capital . Tier 1 Leverage Ratio. . . . . . . .

$ 269,613 12.98 % $ 166,163 236,533 11.39 124,623 236,533 11.39 93,467 236,533 10.69 88,498 $ 252,501 12.16 % $ 166,137 243,461 11.72 124,603 243,461 11.72 93,452 243,461 11.01 88,455

8.00 % $ 218,089 6.00 176,549 4.50 145,393 4.00 88,498 8.00 % $ 218,055 6.00 176,521 4.50 145,370 4.00 88,455

10.50 %

N/A N/A N/A N/A

N/A N/A N/A N/A

8.50 7.00 4.00

10.50 % $ 207,671 8.50 166,137 7.00 134,986 4.00 110,569

10.00 %

8.00 6.50 5.00

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