Bridgewater Bank Annual Report

Asset Quality The Company emphasizes credit quality in the originating and monitoring of the loan portfolio, and success in underwriting is measured by the levels of classified and nonperforming assets and net charge-offs. Federal regulations and internal policies require the use of an asset classification system as a means of managing and reporting problem and potential problem assets. The Company has incorporated an internal asset classification system, substantially consistent with federal banking regulations, as a part of the credit monitoring system. Federal banking regulations set forth a classification scheme for problem and potential problem assets as “substandard,” “doubtful” or “loss” assets. An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. Assets which do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are required to be designated “watch.” The following table presents information on loan classifications at December 31, 2018. The Company had no assets classified as doubtful or loss.

Risk Category

(dollars in thousands)

Watch Substandard

Total

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Construction and Land Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real Estate Mortgage: 1 - 4 Family Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CRE Owner Occupied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CRE Nonowner Occupied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Real Estate Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consumer and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

600 $

8 $

608

2,669

198

2,867

3,195

1,685 2,235

4,880 2,235 3,194

—

3,194 6,389

—

3,920 10,309

— 58 Totals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,658 $ 4,184 $ 13,842 Nonperforming Assets Nonperforming loans include loans accounted for on a nonaccrual basis and loans 90 days past due and still accruing. Nonperforming assets consist of nonperforming loans plus foreclosed assets. Nonaccrual loans totaled $581,000 as of December 31, 2018 and $1.1 million as of December 31, 2017, a decrease of $558,000. There were no loans 90 days past due and still accruing as of December 31, 2018 and 2017. There were no foreclosed assets as of December 31, 2018 and $581,000 as of December 31, 2017, a decrease of $581,000. 58

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