Bridgewater Bancshares, Inc. Annual Report

the core and shell of a new headquarters building for the Bank in St. Louis Park, Minnesota, and the Bank will pay the Contractor a contract price consisting of the cost of work plus a fee equal to 3.75% of the cost of work, subject to a guaranteed maximum price of $23.0 million, with anticipated construction to be completed in 2020. As of December 31, 2019, $15.2 million has been paid under this Construction Contract. On December 3, 2019, the Bank entered into a contract with a third party relating to the construction of the interior build-out of the new headquarters building for the Bank. The sum of the contract is $6.32 million, with anticipated construction to be completed in 2020. As of December 31, 2019, no payments had been made under this contract. Operating lease obligations are in place for facilities and land on which banking branches are located. See Note 6 of the Company’s Consolidated Financial Statements included as part of this report for additional information. The Company believes that it will be able to meet all contractual obligations as they come due through the maintenance of adequate cash levels. The Company expects to maintain adequate cash levels through earnings, loan and securities repayments and maturity activity and continued deposit gathering activities. As described above, the Company has in place various borrowing mechanisms for both short-term and long-term liquidity needs. Shareholders’ Equity Shareholders’ equity at December 31, 2019 was $244.8 million, an increase of $23.8 million, or 10.8%, over shareholders’ equity of $221.0 million at December 31, 2018, primarily due to $31.4 million of net income retained and a $6.3 increase in accumulated other comprehensive income, partially offset by $15.0 million of stock repurchases made under the Company’s stock repurchase program. The increase in accumulated other comprehensive income primarily resulted from interest rate fluctuations between periods. Stock Repurchase Program . On January 22, 2019, the Company adopted a stock repurchase program. Under the repurchase program, the Company was initially authorized to repurchase up to $15.0 million of its common stock in open market transactions or through privately negotiated transactions at the Company’s discretion. On July 23, 2019, the Company’s Board of Directors approved a $10.0 million increase to the Company’s stock repurchase program, increasing the authorization to repurchase common stock under the program from a total of $15.0 million to a total of $25.0 million. During the year ended December 31, 2019, the Company repurchased 1,331,512 shares of its common stock, representing approximately 5% of the Company’s outstanding shares. Shares were repurchased at a weighted average price of $11.23 for a total of $15.0 million. All shares repurchased under the stock repurchase program were converted to authorized but unissued shares. At December 31, 2019, the remaining amount that could be used to repurchase shares under the stock repurchase program was $10.0 million. Regulatory Capital. The Company and the Bank are subject to various regulatory capital requirements administered by federal banking regulators. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by federal banking regulators that, if undertaken, could have a direct material effect on the Company’s and Bank’s business. Under applicable regulatory capital rules, the Company and 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 Bank must also meet certain specific capital guidelines under the prompt corrective action framework. The capital amounts and classification are subject to qualitative judgments by the federal banking regulators about components, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios of common equity Tier 1 capital, Tier 1 capital and total capital to risk-weighted assets and of Tier 1 capital to average consolidated assets (referred to as the “leverage ratio”), as defined under the applicable regulatory capital rules. Management believes the Company and the Bank met all capital adequacy requirements to which they were subject as of December 31, 2019. The regulatory capital ratios for the Company and the Bank to meet the minimum capital adequacy standards and for the Bank to be considered well capitalized under the prompt corrective action

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