Bridgewater Bank Annual Report

Bridgewater Bancshares, Inc. and Subsidiaries Notes to Consolidated Financial Statements (dollars in thousands, except share data)

Note 1: Description of the Business and Summary of Significant Accounting Policies Organization

Bridgewater Bancshares, Inc. (the “Company”) is a financial holding company whose operations consist of the ownership of its wholly-owned subsidiaries, Bridgewater Bank (the “Bank”) and Bridgewater Risk Management, Inc. The Bank commenced operations in 2005 and provides retail and commercial loan and deposit services, principally to customers within the Minneapolis-St. Paul-Bloomington, MN-WI Metropolitan Statistical Area. In 2008, the Bank formed BWB Holdings, LLC, a wholly owned subsidiary of the Bank, for the purpose of holding repossessed property. In 2018, the Bank formed Bridgewater Investment Management, Inc., a wholly owned subsidiary of the Bank, for the purpose of holding certain municipal securities and to engage in municipal lending activities. Bridgewater Risk Management, Inc. was incorporated in December 2016 as a wholly-owned insurance company subsidiary of the Company. It insures the Company and its subsidiaries against certain risks unique to the operations of the Company and for which insurance may not be currently available or economically feasible in today’s insurance marketplace. Bridgewater Risk Management pools resources with several other insurance company subsidiaries of financial institutions to spread a limited amount of risk among themselves. Initial Public Offering On March 16, 2018, the Company completed an initial public offering (“IPO”) and received net proceeds, after deducting underwriting discounts and offering expenses, of $58.9 million for the shares of common stock sold by the Company in the offering. Exchange Agreement During 2018, the Company exchanged a total of 3,845,860 shares of the Company’s non-voting common stock, which represented 100% of the outstanding shares of non-voting common stock, for 3,845,860 shares of the Company’s voting common stock. During the IPO, Castle Creek Capital Partners V, LP and GCP Capital Partners Holdings LLC and certain of its affiliated/managed funds transferred 1,022,318 shares of the Company’s non-voting common stock to the underwriters to be converted into shares of common stock. In October 2018, the Company entered into Exchange Agreements with Castle Creek Capital Partners V, LP, EJF Sidecar Fund, Series LLC – Series E and Endeavour Regional Bank Opportunities Fund II LP providing for the exchange of the remaining 2,823,542 shares of the Company’s non-voting common stock for 2,823,542 shares of the Company’s common stock. Principles of Consolidation The consolidated financial statements include the amounts of the Company, the Bank, with locations in Bloomington, Greenwood, Minneapolis (2), St. Louis Park, Orono, and St. Paul, Minnesota, BWB Holdings, LLC, Bridgewater Investment Management, Inc., and Bridgewater Risk Management, Inc. All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates in Preparation of Financial Statements The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

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