Bridgewater Bank Annual Report

state banking laws, regulations and policies. See "Supervision and Regulation—Supervision and Regulation of the Bank—Dividend Payments." Under the terms of a loan agreement with a third party correspondent lender which the Company entered into in February of 2016, the Company cannot declare or pay any cash dividend or make any other distribution in respect to capital stock without the prior written consent of the lender. In addition, under the terms of the subordinated notes issued in July of 2017, and the related subordinated note purchase agreements, the Company is not permitted to declare or pay any dividends on capital stock if an event of default occurs under the terms of the subordinated notes, excluding any dividends or distributions in shares of, or options, warrants or rights to subscribe for or purchase shares of, any class of our common stock and any declaration of a non-cash dividend in connection with the implementation of a shareholders' rights plan. Unregistered Sales of Equity Securities On October 25, 2018, the Company entered into Exchange Agreements (the “Exchange Agreements”) with Castle Creek Capital Partners V, LP, EJF Sidecar Fund, Series LLC – Series E and Endeavour Regional Bank Opportunities Fund II LP (collectively, the “Investors”), providing for the exchange of a total of 2,823,542 shares of the Company’s non-voting common stock, par value $0.01 per share, for 2,823,542 shares of the Company’s common stock, par value $0.01 per share. The non-voting common stock was originally issued to the Investors in private placement transactions that were completed in 2015 and 2016, and was issued to enable the equity ownership of the Investors to comply with applicable banking laws and regulations. The Exchange Agreements contain customary representations, warranties and covenants made by each of the Investors and the Company. A member of the Company’s board of directors, David J. Volk, is a principal at Castle Creek Capital, LLC, which is the sole general partner of Castle Creek Capital Partners V, LP. Pursuant to the terms of the Company’s amended and restated articles of incorporation, the non-voting common stock was convertible into common stock, subject to certain limitations. The number of shares that the Investors received pursuant to the Exchange Agreements is equal to the number of shares of common stock that the Investors would have received upon conversion of the non-voting common stock. The exchange transactions were effected because the non- voting common stock could only be converted at the time of a transfer or sale of the non-voting common stock that satisfied certain conditions set forth in the amended and restated articles of incorporation. The common stock issued upon exchange of the non-voting common stock was offered and exchanged in reliance on exemptions from registration provided by Sections 3(a)(9) and 18(b)(4) of the Securities Act of 1933, as amended. Use of Proceeds from Registered Securities On March 16, 2018, the Company sold 5,379,513 shares of common stock in its initial public offering, including 1,005,000 shares of common stock sold pursuant to the exercise in full by the underwriters of their option to purchase additional shares to cover over-allotments. All of the shares were sold pursuant to the Company’s Registration Statement on Form S-1, as amended (File No. 333-223019), which was declared effective by the SEC on March 13, 2018. There has been no material change in the planned use of proceeds from the initial public offering as described in the Company’s prospectus filed with the SEC on March 14, 2018 pursuant to Rule 424(b)(4) under the Securities Act of 1933. From the effective date of the registration statement through December 31, 2018, the Company has contributed $25.0 million of the net proceeds of the initial public offering to the Bank. ITEM 6. SELECTED FINANCIAL DATA The following consolidated selected financial data is derived from the Company’s audited consolidated financial statements as of and for the five years ended December 31, 2018. This information should be read in connection with our audited consolidated financial statements, related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this report.

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