Bridgewater Bancshares, Inc. Annual Report

framework are presented in the following tables. The Company’s and the Bank’s actual capital amounts and ratios are as of the dates indicated.

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. . . . . . . . (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. . . . . . . . December 31, 2018

$ 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

Minimum Required For Capital Adequacy

For Capital Adequacy Purposes Plus Capital Conservation Buffer

To be Well Capitalized Under Prompt Corrective Action Regulations

Actual

Purposes

Amount Ratio Amount Ratio Amount Ratio Amount Ratio

$ 263,909 14.55 % $ 145,111 218,888 12.07 108,833 218,888 12.07 81,625 218,888 11.23 77,971 $ 230,865 12.76 % $ 144,776 210,474 11.63 108,582 210,474 11.63 81,436 210,474 10.82 77,795

8.00 % $ 179,121 6.00 142,844 4.50 115,635 4.00 77,971 8.00 % $ 178,707 6.00 142,514 4.50 115,368 4.00 77,795

9.875 %

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

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

7.875 6.375

4.00

9.875 % $ 180,970 7.875 144,776 6.375 117,630 4.00 97,244

10.00 %

8.00 6.50

5.00 The Company and the Bank are subject to the rules of the Basel III regulatory capital framework and related Dodd-Frank Wall Street Reform and Consumer Protection Act. The rules include the implementation of a capital conservation buffer that is added to the minimum requirements for capital adequacy purposes. The capital conservation buffer was subject to a four year phase-in period that began on January 1, 2016, and was fully phased-in on January 1, 2019, at 2.5%. The required phase-in capital conservation buffer during 2018 was 1.875%. A banking organization with a conservation buffer of less than the required amount will be subject to limitations on capital distributions, including dividend payments, and certain discretionary bonus payments to executive officers. At December 31, 2019, the ratios for the Company and the Bank were sufficient to meet the fully phased-in conservation buffer. Off-Balance Sheet Arrangements In the normal course of business, the Company enters into various transactions to meet the financing needs of clients, which, in accordance with GAAP, are not included in the consolidated balance sheets. These transactions include commitments to extend credit, standby letters of credit, and commercial letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in the consolidated balance sheets. Most of these commitments mature within two years and the standby letters of credit are expected to expire without being drawn upon. All off-balance sheet commitments are included in the determination of the amount of risk- based capital that the Company and the Bank are required to hold. The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit, standby letters of credit, and commercial letters of credit is represented by

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