Bridgewater Bank Annual Report

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, 2018 was $221.0 million, an increase of $83.8 million, or 61.1%, over shareholders’ equity of $137.2 million at December 31, 2017, primarily due to $58.9 million of net proceeds from the issuance of common stock in the Company’s initial public offering and $26.9 million of net income, offset by a $2.7 million decrease in accumulated other comprehensive income. The decrease in accumulated other comprehensive income primarily resulted from interest rate fluctuations between periods. 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, 2018. 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 framework are set forth in the following tables. The Company’s and the Bank’s actual capital amounts and ratios are as of the dates indicated.

To be Well Capitalized Under Prompt Corrective Action Regulations Amount Ratio

For Capital Adequacy

Actual

Purposes

December 31, 2018

Amount Ratio

Amount Ratio (dollars in thousands)

Company (Consolidated): Total Risk-Based Capital . . . . . . . . . . . . . . . . $ 263,909 14.55 % $ 145,111 Tier 1 Risk-Based Capital . . . . . . . . . . . . . . . 218,888 12.07 108,833 Common Equity Tier 1 Capital . . . . . . . . . . . 218,888 12.07 81,625 Tier 1 Leverage Ratio . . . . . . . . . . . . . . . . . . . 218,888 11.23 77,971 Bank: Total Risk-Based Capital . . . . . . . . . . . . . . . . $ 230,865 12.76 % $ 144,776 Tier 1 Risk-Based Capital . . . . . . . . . . . . . . . 210,474 11.63 108,582 Common Equity Tier 1 Capital . . . . . . . . . . . 210,474 11.63 81,436 Tier 1 Leverage Ratio . . . . . . . . . . . . . . . . . . . 210,474 10.82 77,795

8.00 %

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

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

6.00 4.50 4.00

8.00 % $ 180,970 6.00 144,776 4.50 117,630 4.00 97,244

10.00 %

8.00 6.50 5.00

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