Bridgewater Bancshares, Inc. Annual Report

The following table presents a summary of nonperforming assets, by category, at the dates indicated:

December 31,

(dollars in thousands)

2019 2018

2017

2016

2015

Nonaccrual Loans: Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7 $ 8 $ 9 $ 15 $ 98 Construction and Land Development . . . . . . . . . . . . . . . . . . . . . . 176 198 583 604 615 Real Estate Mortgage: 1 - 4 Family Mortgage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278 317 472 805 1,029 CRE Owner Occupied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — — 596 CRE Nonowner Occupied. . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — 801 — Total Real Estate Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . 278 317 472 1,606 1,625 Consumer and Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 58 75 98 — Total Nonaccrual Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 461 $ 581 $ 1,139 $ 2,323 $ 2,338 Total Nonperforming Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 461 $ 581 $ 1,139 $ 2,323 $ 2,338 Plus: Foreclosed Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 581 4,183 726 Total Nonperforming Assets (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 461 $ 581 $ 1,720 $ 6,506 $ 3,064 Total Restructured Accruing Loans . . . . . . . . . . . . . . . . . . . . . . . . . 276 181 2,178 3,286 4,270 Total Nonperforming Assets and Restructured Accruing Loans . . . $ 737 $ 762 $ 3,898 $ 9,792 $ 7,334 Nonaccrual Loans to Total Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 0.02 % 0.03 % 0.08 % 0.23 % 0.29 % Nonperforming Loans to Total Loans . . . . . . . . . . . . . . . . . . . . . . . 0.02 0.03 0.08 0.23 0.29 Nonperforming Assets to Total Loans Plus Foreclosed Assets (1) . . 0.02 0.03 0.13 0.65 0.38 Nonperforming Assets and Restructured Accruing Loans to Total Loans Plus Foreclosed Assets . . . . . . . . . . . . . . . . . . . . . . . 0.04 0.05 0.29 0.97 0.92 The balance of nonperforming assets can fluctuate due to changes in economic conditions. The Company has established a policy to discontinue accruing interest on a loan (that is, place the loan on nonaccrual status) after it has become 90 days delinquent as to payment of principal or interest, unless the loan is considered to be well-collateralized and is actively in the process of collection. In addition, a loan will be placed on nonaccrual status before it becomes 90 days delinquent unless management believes that the collection of interest is expected. Interest previously accrued but uncollected on such loans is reversed and charged against current income when the receivable is determined to be uncollectible. If management believes that a loan will not be collected in full, an increase to the allowance for loan losses is recorded to reflect management’s estimate of any potential exposure or loss. Generally, payments received on nonaccrual loans are applied directly to principal. There are not any loans, outside of those included in the table above, that cause management to have serious doubts as to the ability of borrowers to comply with present repayment terms. Due to the low levels of nonaccrual loans, gross income that would have been recorded on nonaccrual loans is $44,000. Allowance for Loan Losses The allowance for loan losses is a reserve established through charges to earnings in the form of a provision for loan losses. The Company maintains an allowance for loan losses at a level management considers adequate to provide for known and probable incurred losses in the portfolio. The level of the allowance is based on management’s evaluation of estimated losses in the portfolio, after consideration of risk characteristics of the loans and prevailing and anticipated economic conditions. Loan charge-offs (i.e., loans judged to be uncollectible) are charged against the reserve and any subsequent recovery is credited to the reserve. The Company analyzes risks within the loan portfolio on a continual basis. A risk system, consisting of multiple grading categories for each portfolio class, is utilized as an analytical tool to assess risk and appropriate reserves. In addition to the risk system, management further evaluates risk characteristics of the loan portfolio under current and anticipated economic conditions and considers such factors as the financial condition of the borrower, past and expected loss experience, and other factors which management feels deserve recognition in establishing an appropriate reserve. These estimates are reviewed at least quarterly, and, as adjustments become necessary, they are recognized in the periods in which they become known. Although (1) Nonperforming assets are defined as nonaccrual loans and loans greater than 90 days past due still accruing plus foreclosed assets. There were no loans greater than 90 days past due still accruing for any period shown.

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