Annual Review 2019

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2019 annual review

Why? we see banking D i f f e r e n t ly. In everything we do, we aim to challenge The status quo. We are a team of nimble Banking professionals who want to redefine What it means to work in this industry. We believe that banking should Be unconventional. Our dedicated Team provides an unparalleled experience and our Clients notice a difference. Like true Entrepreneurs , we value responsiveness and Quick action. Accuracy is the foundation Of our business, and together we learn from each experience. Our journey began in 2005, but our story Of growth is just getting started. That’s The refreshing attitude of the finest In the twin cities. Entrepreneurial bank

fellow CLIENTS AND SHAREHOLDERS,

We often get asked the question, “Why Bridgewater?” When you look at our local team, our commitment to responsive support and our unconventional client experience, the question seems to beg – “Why not Bridgewater?” If you are a client or shareholder, thank you for your continued support and patronage. It is a privilege to serve you. For those who are not, I invite you to see what makes Bridgewater the bank of choice in the Twin Cities. It’s a decision you won’t regret. As a team, we set the bar higher each year, and 2019 was no exception. The Bank posted healthy financial returns as we completed our 14th straight year of profitability. We surpassed $2 billion in assets and held our position as one of the largest banks headquartered in Minnesota. We were voted best bank in three Finance & Commerce Reader Rankings categories: Best Commercial Bank, Best Commercial Mortgage Lender and Best Small Business Bank. The doors of our new Bloomington branch opened, and progress on our new headquarters, Bridgewater Corporate Center, continued. We look forward to debuting this 84,000 square foot state-of-the-art facility in summer 2020. In true Bridgewater fashion, it will be a banking space unlike any other. While we celebrate the success of the past year, we are also planning for the future. Looking ahead, several strategies are underway in which we plan to invest in the Bridgewater experience, including enhanced digital technologies, expanded product offerings and exciting facility developments. As Bridgewater continues to grow, our commitment to operate as the premier real estate and small business lender in the Twin Cities will not change. We know clients expect the best of both worlds: the sophistication of a larger institution, with the unparalleled client service of a flexible, local bank. Building your bank continues to be an incredibly rewarding journey. While numbers show Bridgewater’s financial position, our success goes beyond that. As always, I remain appreciative of the efforts of our network. Every success from 2019 is a reflection of your trust in us. To our shareholders, thank you for your continued trust in Bridgewater Bank. It is a privilege to be building your bank. To our clients, we recognize that you havemany banking options, andwe appreciate you selecting Bridgewater as your bank of choice. To our teammembers, your dedication makes our success a reality. Thank you for sharing your talents, expertise and commitment with the Finest Entrepreneurial Bank in the Twin Cities.

Jerry Baack Chairman of the Board

financial highlights

earnings up 17%

Net income In Millions

Tangible book Value per share

diluted Earnings per share

Total deposits In Billions

Total assets In Billions

Total Loans In Billions

$2.3

$2.0

$1.9

$1.8

$1.7

$1.6

$1.3

$1.05

$8.33

$31.4

$7.22

$26.9

$0.91

$5.40 >> yoy growth 15.3%

$16.9 >> yoy growth 16.7%

$0.68

>> CAGR 21.6%

>> CAGR 21.2%

>> CAGR 24.1%

>> YOY GROWTH 14.5%

2017 2018 2019

CAGR = Compound Annual Growth Rate

financial performance and growth 2019 was another defining year in Bridgewater’s continued story of growth, profitability and efficiency. For the year-ended December 31, 2019, Bridgewater earned a record net income of $31.4 million, up 16.7% over 2018. Total consolidated assets reached $2.27 billion as of December 31, 2019, which was $295.1 million in growth over 2018’s year-end. This 15.0% growth in assets was driven by our largest earning asset, our loan portfolio, which reached $1.91 billion with $247.1 million in growth or 14.8% year-over-year. While real estate lending continues to be our niche and the primary source of loan growth in 2019, diversification within different types of real estate, as well as a broadening exposure in other asset classes such as commercial and industrial, was experienced.

Bridgewater continues to experience a reduction in the level of non-performing assets, indicating strong credit quality in the loan portfolio. At December 31, 2019, total non-performing assets represented 0.02% of total assets. On the liability side of the balance sheet, deposits were $1.82 billion, increasing $262.4 million, or 16.8%, as of December 31, 2019, compared to December 31, 2018. This strong growth is a testament to our strategic branch network and responsive support.

With such earnings, momentum and solid capital levels, we are well positioned to continue the Bridgewater story in 2020.

client testimonials

our clients say it best.

Contents CCI PROPerties

8 9

lucky club entertainment renters warehouse timberland partners core value recipients

12-13

client testimonials

CCI PROPERTIES

asset growth 15%

lucky club entertainment

“Synergy, vision and commitment. This is the unconventional equation that makes Bridgewater Bank the perfect fit for our mission in real estate development and leasing.”

“Bridgewater has been our key partner in growth. They’re accessible, available, supportive and more importantly for us, fun. It’s like banking with your friend, not your dad.”

Renovating and revitalizing historic properties doesn’t come naturally to everyone, but for Ed Conley and his family, it certainly does. Family-owned and operated in St. Paul, CCI Properties has been in the business of restoring and renovating buildings and homes in the Twin Cities since 1985. Central to their work is an appreciation for historical preservation and context.  CCI Properties has amassed an award-winning portfolio with a focus on homes and commercial spaces for rent in a variety of styles and locations throughout Minneapolis and St. Paul. By creating environments for small businesses to grow and thrive, their work helps honor a city’s history, while bringing new life into some of its finest buildings.

Take a walk down the St. Anthony Main neighborhood in Minneapolis and chances are you’ll encounter one of Lucky Club Entertainment’s many hot spots. From Aster Café to Jefe Urban Hacienda and The Hideaway, their restaurants have something for everyone, including picturesque views of the Mississippi. For larger gatherings, they offer additional event spaces, including Hall of Kings and The River Room, as well as a short-term rental property, Flash Electric. Despite a competitive Twin Cities’ restaurant landscape, owner and restaurateur Jeff Arundel has seen immense growth in recent years, particularly after a recent acquisition and new-store development.

client testimonials

renters warehouse

loan growth 15%

timberland partners

“Bridgewater is collaborative, creative and provides non- traditional financing options. This is critical for smaller, high-growth companies such as ours.”

“Our primary focus is providing opportunities for people to invest alongside us in real estate. Having a partner like Bridgewater has helped make that focus achievable.”

Renters Warehouse, once an entrepreneurial vision in 2007, now operates as America’s leading real estate investment services company, with more than $3 billion under residential real estate management across the nation. The company services 14,000+ investors in over 42 markets and 25 states, a growth trajectory that has earned them a slot on the prestigious Inc. 500|5000 list of fastest-growing privately held companies in America for nine years in a row. In 2015, the company officially trademarked the term Rent Estate™ to redefine the entire SFR (Single Family Rental) industry as more traditional real estate gives way to this asset. Through their dedicated Portfolio Services Division, the company brings professional, scalable and efficient SFR property management solutions to investment portfolios.

Guided by their mission to build mutually beneficial partnerships with residents, team members and vendors, Timberland Partners has become an award-winning real estate investment, management and development firm operating in the Twin Cities. Timberland’s first acquisition was of a modest 46-unit community when founded in 1992. They’ve come a long way since then, now managing a portfolio of 78 apartment communities in 16 states. Their well-rounded team boasts more than 400 members, 80 partnerships and 550 investors. Together, they stay true to their commitment to care for each other, their residents and their investors.

core values Unconventional. our clients notice a difference. responsive. Under promise, over deliver. dedicated. Don’t Stop until you get it done. growth. if you aren’t moving forward, where are you going? accurate. it’s more than j st an expectation.

christian rekow

Portfolio Manager | Team Member Since 2014 Known for his positive, team-first attitude and contagious energy, Christian provides the unconventional experience that Bridgewater is reputed for. When not on the front lines maintaining client relationships, he’s proactively taking on challenges and continuously seeking more efficient processes behind the scenes. What fuels this unique combination of charisma and conscientiousness? Christian’s genuine passion for business, banking and teamwork. Bridget enninga-robeck Event Marketing Coordinator | Team Member Since 2018 With over 50 bank-sponsored events, Bridget manages a unique portfolio in the world of banking. Her chief priority is providing opportunities for our team to remain networked and continuously networking – an ambition that involves uniting key people with key information. Whether it be a real estate conference or one of our many networking events, Bridget provides her internal clients and external vendors with the timely answers needed to make our brand shine on event day. charlynn stevens Senior Paralegal | Team Member Since 2018 Preparing Bridgewater’s first post-IPO proxy statement may sound daunting, but Charlynn spearheaded the project with the same agility she brings to work each day. Thanks to years of shareholder-relations experience, she executes the duties that are required of a publicly traded company with ease. With a high attention to detail and impeccable organizational skills, Charlynn is known across the organization as someone you can count on. Danielle jenkins Branch Operations & Technical Lead | Team Member Since 2015 By supporting the Bank’s Deposit Services team with strategic solutions for a variety of tasks, Danielle helps our branches, and the teams within them, succeed. Seen as the nucleus of branch communications and processes, she efficiently moves her team forward day-in and day-out. In a growth-oriented environment like Bridgewater’s, Danielle easily adapts and acclimates to the many changes that come her way.

nicole schlauderaff Senior Loan Coordinator | Team Member Since 2015

Nicole never misses a beat in recognizing the importance of getting things done right the first time. For instance, she recently assisted in the launch of her team’s operating sheet, resulting in improved accuracy, efficiency and communication for all involved. Knowing the task may not be easy, Nicole saw an opportunity to share her knowledge and expertise. It’s with this same approach that she prioritizes her daily tasks and tackles them head-on.

products & services

• Competitive Checkings & Savings Accounts • Certificates of Deposit • Digital Wallet • Foreign Currency Exchange • Online & Mobile Banking Client services

deposits up 17%

• ICS & CDARS • Mobile Deposit • Online Bill Pay • Wire Services • Notary Services • IRA Savings & Certificates of Deposit

Personal banking Bridgewater Bank’s dedicated Deposit Services Team provides personalized, professional and responsive service. Our full suite of deposit products is specially designed to meet the unique needs of our entrepreneurial clients. By dealing directly with our Client Specialists and Account Executives, clients avoid automated phone systems and long teller lines. We pride ourselves on delivering an unconventional customer experience by providing responsive support and simple solutions, and our clients notice the difference.

responsive support. simple solutions.

Business Services • Online Banking • Mobile Banking • Remote Deposit • ACH Origination • ACH Positive Pay • ACH Blocking • Lockbox • Sweeps • Bill Pay

• Online Wire Transfer (Domestic & International) • Check Positive Pay

• Debit & Credit Card • Merchant Card • Escrow Servicing • Checking & Money Market Accounts • Zero Balance Accounts • Electronic Reporting

commercial banking Bridgewater Bank’s dedicated relationship team offers responsive support and simple solutions for many business clients that call Bridgewater Bank home. Our experienced team enjoys developing relationships and supporting many of the enhanced products that businesses need to operate efficiently in today’s marketplace. Simply put, our goal is to simplify banking, allowing our clients to focus on their business.

Contents Personal banking & Commercial banking Deposit portfolio & loan portfolio

15 16 17

commercial lending

deposit & Loan portfolio

total equity capital up 11%

• Property Rehabilitation • New Construction • Lot Financing • Land Development Construction & Developmemt commercial loans

Personal Savings Personal Checking

deposit portfolio Personal Savings Personal Checking Business Savings Business Checking Certificates of Deposit

• Receivables & Inventory Financing • Equipment Acquisition • Business Acquisition • SBA Financing • Executive Lines of Credit • Stock/Bond Secured Loans • Auto Financing • Recreational Vehicles • Overdraft Lines of Credit personal loans commercial & industrial • Mini-Permanent Loans • Revolving Lines of Credit • Affordable Housing Financing • Tax Credit Bridge Loans MultiFamily Lending

32%

Business Savings Business Checking Certificates of Depo it

21%

33%

• Owner Occupied Homes • Vacation Homes • Residential Rental Homes • Home Equity Lines of Credit • Construction/Bridge Loans Residential Real Estate • Office Buildings • Retail Strip Centers • Industrial Properties • Mixed-Use Buildings Commercial Real Estate

14%

Loan portfolio Owner Occupied Commercial Real Estate

31%

Non Farm/Non Residential Construction & Development Commercial & Industrial Multifamily 1-4 Family

27%

Lending As the premier real estate lender in the Twin Cities, Bridgewater Bank’s loan products are assembled to meet the distinctive needs of real estate and small business entrepreneurs. Our lenders are experts in the markets we serve. Together, we realize that flexibility and quick responses are integral to ensuring our clients’ success.

10%

15%

financial summary

Consolidated statements of income

12/31/19

12/31/18

INTEREST INCOME

Loans, Including Fees Investment Securities Other

$94,852

$78,033

7,773 1,153

6,694

499

Total Interest Income

103,778

85,226

Interest expense Deposits Notes Payable Federal Home Loan Bank Advances

23,996

15,972 594 1,718 1,568

501

3,407 1,556

Subordinated Debentures Federal Funds Purchased Total Interest Expense NET INTEREST INCOME Provision for loan losses net interest income after provision for loan losses noninterest income Customer Services Fees Net Gain (Loss) on Sales of Available for Sale Securities Net Gain (Loss) on Sales of Foreclosed Assets Other Income Total Noninterest Income Noninterest expense Salaries and Employee Benefits Occupancy and Equipment Other Expense

186

636

29,646

20,488

74,132

64,738

2,700

3,575

Locally founded. locally led.

71,432

61,163

760 516

745

(125) (225) 2,148

2,481

3,826

2,543

22,076 3,085

18,620

2,351

11,771

10,591

Total Noninterest Expense

36,932

31,562

income before income taxes provision for income taxes

38,326

32,144

6,923

5,224

Contents Consolidated statements of income consolidated balance sheets consolidated shareholders’ equity

net income

31,403

26,920

19 20

*Dollars in thousands

board of directors

22-23 24-25

Strategic leadership team

financial summary

consolidated shareholders’ equity

consolidated balance sheets

Assets Cash and Cash Equivalents Bank-Owned Certificates of Deposits

12/31/19

12/31/18

$31,935

$28,444

2,654

3,305

Securities Available for Sale, at Fair Value Loans, Net of Allowance for Loan Losses of $22,526 at December 31, 2019 and $20,031 at December 31, 2018 Federal Home Loan Bank Stock (FHLB), at Cost Premises and Equipment, Net

289,877

253,378

Voting

Non-voting

Voting

Non-voting

Common Stock

Additional Paid-In Capital

Accumulated Other

Comprehensive Income (Loss) Total

Retained

Earnings

1,884,000 1,640,385 7,824 7,614 27,628 13,074

Balance, December 31, 2016

115,366

20,744,001

3,845,860

207

38 65,777 $

52,619 (3,275) $

Accrued Interest Goodwill

6,775 2,626

6,589 2,626 1,052 17,274

368 21,248 180

368

Comprehensive Income Stock-based Compensation Stock Options Exercised Balance, December 31, 2017 Comprehensive Income (Loss) Stock-based Compensation Stock Options Exercised Issuance of Common Stock, Net of Issuance Costs Conversion of Non-voting

16,889

4,359

Other Assets Other Intangible Assets, Net Total Assets

861

90,000

179

14,650

2,268,830

1,973,741

137,162 799 24,074 106

20,834,001

3,845,860

208

69,508

66,324 799

1,084

Liabilities Deposits:

26,920

(2,846)

Noninterest Bearing Interest Bearing

447,509 1,375,801

369,203 1,191,731

37,900

105

58,857

5,379,513

58,803

Total Deposits

1,823,310 1,560,934

Notes Payable Federal Funds Purchased FHLB Advances Subordinated Debentures, Net of Issuance Costs Accrued Interest Payable Other Liabilities

18,000 15,000 124,000 24,630

Stock to Voting Stock Reclassification of the Income Tax Effects of the Tax Cuts and Jobs Act to Retained Earnings

3,845,860

(3,845,860)

(38)

13,000 136,500

(194)

194

24,733 1,982 24,511

1,806 8,373

Balance, December 31, 2018

Total Liabilities

2,024,036

1,752,743

220,998 752 37,745 258 (14,959)

30,097,274

301

96,234

126,031 752

(1,568)

shareholders’ equity

Comprehensive Income Stock-based Compensation Stock Options Exercised Stock Repurchases Issuance of Restricted Stock Awards

31,403

6,342

Preferred Stock, $0.01 Par Value Authorized 10,000,000; None Issued and Outstanding at December 31, 2019 and December 31, 2018

74,850

257

(1,331,512)

(13)

(14,946)

132,960

(1)

Common Stock, $0.01 Par Value Common Stock - Authorized 75,000,000; Issued and Outstanding 28,973,572 at December 31, 2019 and 30,097,274 at December 31, 2018 Retained Earnings Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss)

Balance, December 31, 2019

290

301

4,774 $ 244,794

28,973,572

290

112,093

127,637

112,093 127,637

126,031 96,234 (1,568)

4,774

Total Shareholders’ Equity Total liabilities and shareholders’ equity

244,794

220,998

After tax return on equity - 13.50% Earnings Per share - $1.07 diluted earnings per share - $1.05 tangible book value per share - $8.33

2,268,830

1,973,741

*Dollars in thousands, except share data

Directors

Jerry baack chairman, chief executive officer and president

jeffrey shellberg Secretary, executive vice president and chief credit officer

As the principal founder of Bridgewater, Jerry was responsible for all aspects of the Bank’s formation, including the initial capital raise, business plan, structure and recruitment of the board and management team, and obtaining charter and regulatory approval. He currently serves as Chairman of the Board, Chief Executive Officer and President of Bridgewater, positions he has held since the Bank was founded in 2005.

Jeff is a founder of Bridgewater and founding director of the board. He has worked in the regulatory and commercial banking industry for over 30 years. As Executive Vice President and Chief Credit Officer, Jeff is responsible for all aspects of the Bank’s credit policies and risk management systems. He currently chairs the loan and appraisal committees and plays an integral role in credit actions on the Bank’s largest lending relationships.

lisa brezonik president of salo, llc

thomas trutna President and founder of big ink

A member of the board since December 2019, Lisa is president of Salo, a leading staffing and consulting firm for finance, accounting and human resources in Minneapolis and Chicago. She has held this position since 2018. As an accomplished leader withover 25 years experience, Lisabrings expertise in talent acquisition, human resources and leadership development to Bridgewater.

Thomas is a founding director of the board. He is the President and Founder of BIG INK, a visual communications company that creates branded solutions for Fortune 1000 companies, an organization he has run since 1999. Prior to founding BIG INK, Thomas held marketing and business management positions at General Mills and Periscope, a Twin Cities advertising firm.

james johnson Franchise owner flagship marketing inc., Regional franchise developer at express services, inc.

todd urness shareholder at winthrop & weinstine, p.a.

Todd is a founding director of the board. He is a shareholder at the law firm of Winthrop & Weinstine, P.A., located in Minneapolis. Todd has practiced with Winthrop &Weinstine since 1985 and has been a shareholder with the firm since 1988. He has served on the Board of Directors of Winthrop & Weinstine as well as its senior management and compensation committees since 1993.

James is a founding director of the board. He is a franchise owner of Flagship Marketing, Inc., a privately-held company that operates as Express Employment Professionals (Express), which delivers staffing support and human resource services through a network of franchise office owners. In addition, James currently serves as Regional Franchise Developer for Express Services, Inc.

david juran Executive vice president of dougherty & company llc

david volk Principal at castle creek capital

David, a member of the board since 2010, is the Executive Vice President of Dougherty & Company LLC, a full-service investment bank and brokerage firm founded in 1997. He has been with the company since 2002 and is also a member of the Board of Directors of Dougherty Financial Group LLC, President of Dougherty Funding LLC, President of Dougherty Equipment Finance LLC, Chief Executive Officer of Dougherty Real Estate Advisors LLC and President and Chief Operating Officer of Dougherty Mortgage LLC.

David, a member of the board since 2017, is a principal at Castle Creek Capital, an alternative asset management firm located in Rancho Santa Fe, California, focused on the community banking industry. He has been with Castle Creek Capital since 2005 and has led or supported investments in numerous recapitalization, distressed and growth solutions.

doug parish Former senior vice president and chief Compliance officer of ameriprise financial, inc.

Doug, a member of the board since 2018, is the former Senior Vice President and Chief Compliance Officer for Ameriprise Financial, Inc., a Fortune 250 diversified financial services company. As both a Certified Public Accountant and a Certified Internal Auditor, Doug is a financial expert with 30 years of diverse experience across a number of disciplines, including accounting, finance, audit, risk management, regulatory compliance and corporate governance.

Strategic leadership team

Jerry baack chief executive officer and president

lisa salazar chief deposit officer

As the principal founder of Bridgewater, Mr. Baack was responsible for all aspects of the Bank’s formation, including the initial capital raise, business plan, structure and recruitment of the board and management team, and obtaining charter and regulatory approval. He currently serves as Chairman of the Board, Chief Executive Officer and President of Bridgewater, positions he has held since the Bank was founded in 2005.

Lisa serves as Chief Deposit Officer and has been with the Bank since 2018. In her current role, she is responsible for driving accountability and results through initiatives that deliver revenue growth, market share, new business opportunities and market penetration. In addition to leading a talented team of deposit services professionals, she is responsible for driving the strategic direction of the Bank’s product offering by maintaining awareness of industry trends.

Joe Chybowski chief financial officer

jeffrey shellberg executive vice president and chief credit officer

Joe serves as Chief Financial Officer and has been with Bridgewater Bank since 2013. He directs and manages all financial-related activities for Bridgewater, including accounting, regulatory reporting, liquidity management, investment strategies, insurance and capital development. Additionally, he chairs the Bank’s Asset Liability Management Committee as well as the Investment Committee. mary jayne crocker Executive vice president and chief operating officer Mary Jayne has been with the Bank since its origin and served as Executive Vice President and Chief Operating Officer since 2014. She has been instrumental in building awareness of the Bank’s brand, maintaining and communicating simple deposit solutions and creating positive shareholder relationships. As COO, Mary Jayne is responsible for directing the implementation of all strategic initiatives and overseeing marketing, daily operations, facilities and human resources.

mark hokanson chief technology officer

Mark joined Bridgewater Bank in August 2019 as Chief Technology Officer. In his position, Mark is responsible for driving the Bank’s technology strategy by developing innovative, robust and secure solutions that generate efficiencies across the organization. By leading a dynamic team of IT professionals, he ensures Bridgewater’s technology roadmap is aligned with business goals and growth objectives.

nick place chief lending officer

Nick serves as Chief Lending Officer and has been with Bridgewater Bank since 2007. He oversees a talented team of lenders as well as an active portfolio of loans. In addition to his managerial responsibilities, he actively engages in loan origination, primarily focusing on real estate lending in the Minneapolis/St. Paul metro area. Nick has been instrumental in strategically developing specialty loan products in response to market demands.

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