Bridgewater Bank Annual Report

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

The following tables present the Company and the Bank’s capital amounts and ratios as of December 31, 2018 and 2017:

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 Company (Consolidated): Total Risk-Based Capital . . . . . . . . . . . . . . . . $ 173,848 12.46 % $ 111,638 Tier 1 Risk-Based Capital . . . . . . . . . . . . . . . 132,459 9.49 83,729 Common Equity Tier 1 Capital . . . . . . . . . . . 132,459 9.49 62,797 Tier 1 Leverage Ratio . . . . . . . . . . . . . . . . . . . 132,459 8.38 63,264 Bank: Total Risk-Based Capital . . . . . . . . . . . . . . . . $ 171,805 12.37 % $ 111,134 Tier 1 Risk-Based Capital . . . . . . . . . . . . . . . 154,943 11.15 83,351 Common Equity Tier 1 Capital . . . . . . . . . . . 154,943 11.15 62,513 Tier 1 Leverage Ratio . . . . . . . . . . . . . . . . . . . 154,943 9.83 63,060 Actual December 31, 2017 Amount Ratio

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

To be Well Capitalized Under Prompt Corrective Action Regulations Amount Ratio

For Capital Adequacy

Purposes

Amount Ratio (dollars in thousands)

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 % $ 138,918 6.00 111,134 4.50 90,297 4.00 78,825

10.00 %

8.00 6.50

5.00 The Bank must maintain a capital conservation buffer as defined by Basel III regulatory capital guidelines, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers. For 2018 and 2017, the capital conservation buffer was 1.875% and 1.25%, respectively. The buffer increased incrementally each year until 2019, and the entire 2.5% capital conservation buffer is now fully phased-in. Management believes that, as of December 31, 2018 and 2017, the Company and the Bank’s capital ratios were in excess of those quantitative capital ratio standards applicable on those dates, set forth under the prompt corrective action regulations, including the capital conservation buffer described above. However, there can be no assurance that the Company and the Bank will continue to maintain such status in the future. Note 21: Fair Value Measurement The Company categorizes its assets and liabilities measured at fair value into a three-level hierarchy based on the priority of the inputs to the valuation technique used to determine fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used in the determination of the fair value measurement fall within different

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