Bridgewater Bank Annual Report

Twin Cities MSA was approximately 3.6 million as of December 31, 2018, making it the third largest metropolitan statistical area in the Midwest and 16th largest metropolitan statistical area in the United States. The low unemployment rate of 2.0%, as of November 30, 2018, and the significant presence of national and international businesses make the Twin Cities MSA one of the most economically vibrant and diverse markets in the country. The Company operates in a competitive market area and competes with other, often much larger, retail and commercial banks and financial institutions. Two large, national banking chains, Wells Fargo and US Bank, together controlled 73.5% of the deposit market share in the Twin Cities MSA as of June 30, 2018, based on FDIC data and as displayed in the table below. By comparison, as of the same date, the Company had a deposit market share of approximately 0.8%, which ranked the Company ninth in the Twin Cities MSA overall and fourth in the Twin Cities MSA among banks headquartered in Minnesota.

Total

Market Share

State

Branch Count

Deposits ($000)

Rank

Institution

Headquarters

(%)

1 . . . . . . . . . . . . . U.S. Bancorp 2 . . . . . . . . . . . . . Wells Fargo & Co 3 . . . . . . . . . . . . . TCF Financial Corp. 4 . . . . . . . . . . . . . Bremer Financial Corp. 5 . . . . . . . . . . . . . Bank of America Corp. 6 . . . . . . . . . . . . . Bank of Montreal 7 . . . . . . . . . . . . . Old National Bancorp 8 . . . . . . . . . . . . . Associated Banc-Corp 9 . . . . . . . . . . . . . Bridgewater Bancshares, Inc.

MN CA MN MN NC N/A

100 69,574,781 97 66,325,245

37.64 35.89 3.57 2.47 2.28 2.17 1.74 0.91 0.79 0.57 88.03

85 22 32 36 22 9

6,600,725 4,567,722 4,212,043 4,014,631 3,230,673 1,677,752 1,461,260 1,056,332

IN WI

MN ND

7 2

10 . . . . . . . . . . . .

State Bankshares, Inc. Top 10 Institutions

412 162,721,164

Total Bank Deposits

785 184,819,349

The market has also experienced disruption in recent years due to acquisitions of local institutions by larger regional banks headquartered outside of the market. The Company seeks to attract customers by offering a higher level of responsiveness and by providing a more tailored array of products and services than larger competitors. Products and Services The Company offers a full array of simple, quality loan and deposit products primarily for commercial clients. While the Company provides products and services that compete with those offered by our large, national and regional competitors, the Company additionally offers responsive support and personalized solutions tailored for each client. The Company emphasizes customer service over price, and believes in providing distinguishing levels of client service through the experience of employees, the responsiveness and certainty of the credit process and the efficiency with which business is conducted. The Company believes that clients notice a difference in service compared to the much larger institutions in our market. The Company has built a strong referral network that continually provides opportunities with new client relationships. At this time, the Company does not operate any non-depository business lines such as mortgage, wealth management or trust. Lending. The Bank focuses primarily on commercial lending, consisting of loans secured by nonfarm, nonresidential properties, loans secured by multifamily residential properties, construction loans, land development loans and commercial and industrial loans. The Bank has a particular niche in multifamily financing which has historically represented approximately 20-25% of the loan portfolio. This asset class has performed extremely well and has lower historical loss rates when compared to other loan types. Commercial real estate loans (excluding multifamily and construction) consist of owner and nonowner occupied properties. This portfolio segment is well diversified with loans secured by office buildings, retail strip centers, industrial properties, senior housing, hospitality and mixed-use properties. In addition to loans secured by improved commercial real estate properties, the Bank engages in construction

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